Road to v2 and Beyond— AMA with Fringe Finance
The following is a transcript of our recent Twitter Spaces featuring team members Brian Pasfield and Carlos Cano, answering questions from the Fringe community. You can listen to the whole conversation here.
There is some excitement in the air about the v2 announcement. Do you want to give people any comments on what to expect or anything we didn’t put in the announcements related to v2?
Brian — 3:58
I think the announcement says most of it. It certainly has all the headline items and talks very briefly about some of the benefits of those. I personally am quite excited about all of this. There’s a lot of good thinking that’s gone into this. We’ve had a lot of fun and are getting very close to the end of this. It’s been quite a journey and our dev and design teams have been working very closely on this. That’s what we’re here for: to do this kind of stuff, and we love it.
I think what is really important with some of this is it attempts as best it can at this point to increase the censorship resistance of the platform. And that is a continuing theme of the way we think. We’re very keen to shore up as much censorship resistance as possible, given TradFi is fulfilling its expected promise of making attacks on DeFi, and DeFi is responding in kind because it is anti-fragile. Every attempt toward censoring DeFi is countered by DeFi strengthening its ability to resist that.
Some of what we’re doing here incorporates that as well as, of course, adding new functionality to the platform. And that functionality is quite exciting as far as we’re concerned with new trading facilities and other useful utilities, such as support for LP tokens as collateral on the platform. So, we’ve cast our net far and wide in terms of what we believe is going to be useful for the details of the DeFi ecosystem, both in its engineering, its censorship, resistance, and a set of features to add utility. That’s really where we’re at and you know, it’s a marathon here. We are enjoying the run. Let’s put it that way.
What do you think about all this? Especially this last weekend, which also featured the hacking of a major competitor to Fringe Finance
Carlos — 6:42
Speaking about censorship resistance. This is as good a place as any to speak of the most recent events of the crypto world. I do feel a bit hopeful seeing that, given everything that’s going on, crypto is in a run. So it does seem to signal, at least to me, it’s gotten more people to double down that crypto is a viable alternative to the traditional system, especially when it comes to user personal agency, especially self-sovereignty or self-custody. What do you think about all this? Especially this last weekend, which also featured the hacking of a major competitor to Fringe Finance
Brian — 7:47
In respect of DeFi, representing a viable alternative to the traditional banking system, well, that’s really what it all set out to be initially and that is really what the considered players in DeFi are really all about.
With all of that in mind, that’s why Fringe is adding utility and has a roadmap to ensure that there is a set of utilities that will be useful to a cohort of users who increasingly migrate from traditional banking environments to the DeFi environment. To date, that has very much been people interested in DeFi, but as the landscape changes, the community of users that will migrate to DeFi will be doing so for reasons that really embrace its core value proposition of censorship resistance. And, of course, for the opportunities that are represented within the crypto space.
Brian — 9:31
That censorship resistance, as well as trust minimization, are quite key value propositions of DeFi. Trust minimization really addresses the issues that are happening in a lot of “crypto businesses” such as FTX, Celsius, and so forth. They’re called crypto businesses, but in my eyes, they’re not crypto businesses, They’re not in crypto at all. They’re custodial. And they’re very trusted organizations.
It’s quite the antithesis of crypto. So to see headlines that refer to organizations like that as being in crypto grates with me a little, because the public at large sees those great dumpster fires being referred to in the media as “crypto companies” and are asking, “can crypto regain trust” etc. I just shake my head honestly. There is certainly a lot of education that we want to impress upon the world regarding the fact that those organizations are the antithesis of being in crypto.
DeFi represents the kind of trust minimization and the censorship resistance that attempts to address those kinds of issues that exist with those “crypto companies” that have failed.
Carlos — 11:37
I think a lot of people are waking up to the fact that there’s an attack on crypto, particularly from the US government, and that’s taking the form of this operation choke point to unbank cryptocurrency companies.
That’s quite unfortunate, but I think it could just be one of those cases where attempting to censor something ends up driving more attention to the need for that thing. In particular, I do feel like we’re seeing that with this little rally that the more the governments are trying to shut down this, the more it spotlights the need for that.
What are your impressions on this hack that just took place for the biggest learning platform out there as of right now?
Brian — 13:10
DeFi does have matters that it needs to continue to address, as highlighted by the Euler attack.
Really, that is the vulnerability of smart contracts. It’s a double-edged sword with smart contracts. We receive the great benefit of Turing complete execution platforms that enable fairly complex protocols to be assembled. But as a consequence, there is quite the opportunity for vulnerabilities to exist within that code unless it’s done correctly.
DeFi needs to continue to eliminate those vulnerabilities. I think the best practices at this point are the best way to avoid them from a DeFi platform perspective. That includes things such as audits, bug bounties, development teams that are cognizant of the history of attacks, and building solutions that avoid those.
Now, we have the added utility of a silent auditor, which is the LLMs, the large language models, and AI platforms that can help teams identify vulnerabilities in code. Fringe Finance is employing those kinds of technologies.
Those are the best practices from the development perspective. And potentially, there is a set of practices that can be adopted by the user community. One of which is to spread some of their assets across different platforms so that there is no single point of exposure. I don’t think that is discussed much in a lot of the discussions around this. There is, let’s call it responsibility, of a user to spread the risk that exists in many domains in life.
For example, in the traditional banking system, in America and in many nations, there are depositor insurance programs run by the governments and the banking systems within those nations. And this would have been more true last week, but, they extensively have caps or published caps to the amount that any single deposit is protected.
Brian — 16:53
I know, personally, individuals who spread their holdings amongst a number of banks to ensure that they minimize any exposure above and beyond those deposit insurance limits. So, I think that given the world is not perfect and nothing is assured, the thesis that using different platforms can have merit in spreading the risk when deploying assets across them can still apply to DeFi.
Carlos — 17:44
I think also there has got to be a conversation at some point about composability and how it needs to be limited somehow. Because what you do not want is for composability to end up causing huge domino effects every time something breaks, as things tend to.
I reckon there is going to be some innovation coming in the not-too-distant future that addresses this issue because I don’t see any other way forward besides either on-chain or off-chain practices that limit exposure to events like this.
It also speaks about the risk management that certain players need to have because I reckon there were a couple of DAOs that were effectively wrecked due to their exposure to Euler.
Is Fringe open and running on the zkSync Closed Mainnet?
Brian — 19:24
Currently, we’re running on the Testnet. We’re just about to deploy to the Mainnet. We’re in a discussion at the moment with The Graph and zkSync. They’re ironing out an issue that is causing a wrinkle with deployment there. As soon as they help us sort through that wrinkle we’ll be deployed to the Closed Mainnet. We don’t see that as being a big issue because all of our smart contracts operate seamlessly on all of the L2s that we’ve deployed to, so it’s just an integration matter with The Graph.
About our day 1 release: On day one with deployment to multi-chain, will Fringe be supporting zkSync?
Brian — 20:59
I think so. I think very much so. Of course, this is subject to the technical guys ironing out the wrinkles. But there is certainly no intention to delay things on any of the chains that we currently have in our sights.
Current thoughts on USDC with all the anti-user, classic KYC stuff coming out of Circle?
Brian — 21:47
I think there are aspects of the DeFi ecosystem that rely upon centralized aspects, such as stable points. Or, more to the point, stablecoins that are centralized — and generally these are pegged stablecoins.
I have a bit of a prediction that the love affair that DeFi currently has with pegged stable coins will wane and be replaced with a new lover, which will be non-pegged stablecoins. Simply because the pegged stablecoins, at this point, require confiscatable assets or centralized aspects.
Those confiscatable assets represent a risk to the stability of those tokens. And the centralized nature of them means that those stablecoins have things such as blacklists that can cause quite a bit of a problem for a DeFi protocol if they’re interacting with those stablecoins. So, that risk does need to be addressed in the long term. It doesn’t need to be addressed by DeFi, and there are various ways to think about that.
As I mentioned, that love affair with pegged stablecoins will probably wane. Because, to date, those pegged stable coins have performed satisfactorily. But over time, what I envisage is those stablecoins will not perform as satisfactorily because they will be subject to the kind of issues that I just listed. Therefore, alternatives will begin to be considered more and more by the DeFi ecosystem.
I mentioned non-pegged stablecoins. Now, what that means is stablecoins that, though they have crypto-asset backing, will not necessarily be pegged one-to-one to the US Dollar. So they will float within a few percent over time and that will reflect an interest rate. There will be relative stability in those stablecoins, but they will not necessarily be, as I mentioned, one-to-one pegged. The benefit here is that it will reduce the reliance upon centralized and censorable aspects of the DeFi ecosystem. That really is the only way forward that I see.
People will necessarily wish to get there to reconceptualize DeFi in respect of the expectation that there will be a stablecoin that’s one-to-one pegged with their favorite currency, or favorite fiat currency. I think that expectation will be relaxed somewhat because the utility of those pegged stablecoins will begin to fail. So there will be an increasing need for people to consider alternative approaches.
Carlos — 26:05
I mean, there is one case of a project that I know of that is trying to be a stablecoin that’s pegged to the value of computation and not really pegged to the value of something like a fiat currency. That kind of thing could be interesting in the end; for something like crypto. It’s almost like a Proof-of-Work pegged stablecoin. I always thought those kinds of solutions could be really interesting because they would really reflect on the value of the industry and everything it stands for — especially the pillars DeFi was founded upon.
That could be really interesting for DeFi as a whole; to abandon this pretension of pegging everything to the price of the same financial system that we’re trying to effectively replace.
Carlos — 27:22
Someone pointed out on the telegram chat that Euler had several completed code checks and audits, but as we see, that does not guarantee 100% security.
I would say there’s a caveat to that. This is just me speculating here, but the hack in Euler originated from a “Donate to Treasury” function. So, I’m speculating here, but I think it could be a case of either auditors or the Euler team itself lowering their guards because they were dealing with a function that was supposed to be a quick way for users to donate to the Treasury.
I wonder if that was the case and if that’s why this feature wasn’t thoroughly audited. But it’s a good reminder for everyone in DeFi that you should always try to be exhaustive with these kinds of things.
How does Fringe plan on presenting its products as a safe haven for large sums of capital in a sea of rug-pulls and exploits?
Brian — 28:57
I’ve touched on some of the points that I think are relevant there for projects to best ensure that they assure themselves and also the market of their robustness against those kinds of vulnerabilities. I did mention best practices and so forth. I think there are some other factors to consider here, and that’s also the Lindy effect. The Lindy effect is: the longer something has been in existence, the more likely it’s going to exist for an extended period of time.
One thing with Fringe Finance is we have been in existence for a while and have not experienced a hack. That is a heuristic that, I think, goes above and beyond the assurances that the team can make in respect of the strength and number of audits and also other quality assurance programs, such as white hat hacking programs, bug bounties, and any other practices they can bring to bear to best assure the code is as vulnerability free as possible. Those heuristics, such as Lindy and the time spent in the market, are important.
There’s certainly due diligence that needs to be undertaken. With Euler, it was due to an additional change made to the platform post originally going live. I think that the discipline of ensuring any changes are appropriately and thoroughly scrutinized should apply to any ongoing release. There are a number of factors there. There are best practices and various other things that come into play. to allow users and the potential uses of the platform to gauge.
In my discussions with institutional investors, for example, they look at things such as longevity. The longevity of a platform is a key factor in their consideration as to whether they deploy assets onto those platforms. That’s one thing that we have to our advantage, which is time in the market.
Carlos — 32:40
Yeah, it’s quite a large ecosystem. But I do see that a lot of value in it comes from the long play. Although we tend to think very short-term in crypto. It’s a reality that a lot of things continue to grab momentum by the simple fact of them not going down or continuing to prove themselves against tough conditions, which is what you see at the end of bear markets normally. A lot of the projects that sort of earned their badge of honor for surviving the bear market, come out of them effectively strengthened.
Does the team have a Plan B in place in the event that Fringe geo-farming for lenders fails to bootstrap TVL?
Carlos — 33:40
I think this is a good time to remind people that the bootstrapping program is not a one-off thing. It’s effectively a multi-stage process, albeit there are no guarantees that we will manage to attract a lot of capital to the platform. We are considering that, but it’s not going to be a thing we do once. It’s less like putting all of our eggs in one basket but rather a continuous approach to trying to bootstrap as much capital for the platform as possible.
Brian — 34:36
There are many things that will make a platform attractive, increase adoption or attract adoption. One might be a series of bootstrapping programs or yield farming programs that give people momentary interest while those yield programs are in place.
One of the real attractions that a platform will have for any user, and for the platform to increase adoption, will be something I’ve mentioned a few times in this chat: its utility. To date, the Fringe Finance platform has been a solid core lending provider, with solid lending capability.
There is some differentiation in the market compared to some other lending platform options that exist out there in the DeFi ecosystem, but the intent of the team, as indicated by the roadmap, is to further differentiate the platform from competitors in the marketplace. So, to add that additional utility to really make it a compelling place for users to come and exercise their activities in the DeFi ecosystem.
That includes not only lending and saving but additional facilities such as being able to deploy your LP tokens, deploy more than just one capital asset as a lender, borrow more than just one capital asset as a borrower, and have margin trading facilities or leverage trading facilities, including our Margin Trade platform and our Amplify platform. That, as well as having greater stability in the platform through the oracle minimization models of oracle and price feeds that we’re implementing and having more capital-efficient interest rate models that make it attractive for lenders to deploy their capital on our platform.
So there are quite a number of levers there that, at the end of the day, make it compelling in a broad number of areas for any actor to participate in the platform. The yield farming and the bootstrapping program in and of itself is no silver bullet, as no other single action that the project could take would be a silver bullet. It is really a combination of all of this and Fringe v2, that really does shift the dial significantly.
Carlos — 38:32
What’s the difference between the Margin and Amplify platforms?
Brian — 39:05
For Amplify, the notion behind that is to allow a user to amplify their exposure to a given asset. That means going long on that asset. Hand-in-hand with that is the implication that it is going long in relation to its US Dollar value. So it’s considered a single-asset trade.
Someone will walk to the betting table with their money in hand, and they will put down a position where they have a conviction to the given direction of an asset and they will take a position that is above and beyond the capital they put up as the deposit for that.
Depending on the loan-to-value ratio for an asset, a user can multiply their exposure and take a position where they have conviction in the direction of the price of that asset. For example, if I wanted to go long on $LINK tokens, I would put up, let’s say, $100 as a deposit, but then the Amplify platform will give me, say, $250 worth of exposure to $LINK. Therefore, I can enjoy and magnify any of the gains that occur as a result of the market moving in my favor in the direction where I place my trade.
Now, of course, just like in any realm, there is added exposure if the market moves against one’s position. So there are caveats for users to be aware of, but people who wish to and understand how to take leveraged positions will now be provided that capability through our Amplify platform.
Now our margin trade platform also is very similar, but the user can choose the pair of assets that they wish to trade against. So rather than it just being a given asset in relation to the US Dollar, and gaining greater long exposure to the asset against the US Dollar, the user can choose the base asset or the “quote” asset, I should say.
So rather than US Dollars, the user can choose the quote asset to be any of the capital assets that we support or will be supporting on the platform.
The user can choose, for a given pair, the direction of the market that they envisage the market taking and then take a leveraged position according to that. So the user experience in establishing that trade is slightly different to an Amplify trade, and soon we’ll release some video demos of how all of this works leading up to v2.
if anyone is familiar with trading platforms, on Binance, and various other platforms that exist out there, where you’ll have a picture of the chart of the trade — be it a pair, or a given asset in relation to US Dollar, — then you can have a look at that and select the assets that you want involved, plus also the other parameters of the trade, such as how much margin you’re either required or wish to add to that trade or to initiate that trade, and then the degree of exposure that you wish to gain to that trade.
That’s, in essence, what both of those facilities are. And it really opens up new utility for people who have conviction and a user base who is somewhat different from the regular borrower or lender that our platform currently supports.
Addressing the question regarding bootstrapping; does that not represent the silver bullet that some people may think it does.
Brian — 46:05
Now, you know, there are many platforms that have yield programs, but it has not resulted in the adoption of the platform. So there are other factors that come into play. And so really, the marketing team has quite a responsibility to ensure that the messaging is spread in the right places, and also is the right message. They’re things that we talk, multiple times per week about between the engineering team and the marketing team here at Fringe.
So there are a number of factors that come into play. The yield program in and of itself is just one of many factors that can help best assure the success of the platform.
Carlos — 47:35
I mean, we all depend on each other. It’s really important that we as a team also serve the purpose of informing product development and trying to adjust the best we can around that. But I think for v2, we are shaping up well. I’m personally enjoying having a new release that can be considered a standalone thing on its own rather than a progressive thing. And I think people would like that as well.
Any leaks regarding UI changes?
Brian — 48:55
I think I should comment on the UI changes that are going to be part of v2.
First of all, the Amplify and the Margin Trade platforms will have somewhat of a different look on the UI and will begin to bleed that UI design to the more generalized lending platform. We do have quite a number of UI changes to the lending platform. It doesn’t re-design the entire look and feel of the lending platform, but it addresses a whole host of issues that we had with that.
For example, there are not enough decimal places on some of the figures that we present there. So we’ve addressed things like that. There’s far more tool tips to enable people to get a clearer picture of the elements on the user interfaces. We’ve also rationalized some of the fields and pieces of information that we present on the user interface. So there has been a progressive set of steps undertaken to improve the user interface. In subsequent releases, there will be slight, design changes to them, which will be primarily things like CSS, or the web presentation of that.
Essentially, the information will be updated in this new release. Then, potentially, what we consider the look and feel will be somewhat addressed in subsequent releases. In relation to that, we will be redesigning the lending platform so that we incorporate both the lending facility and the borrowing facility into one user interface. Rather than it being separate pages. At the moment, we have ways to merge those so that users go to a single page to undertake the actions of both lending and borrowing. We think that will just make the platform slightly more intuitive. These are the kinds of things that we think will progressively and incrementally add greater attraction to the platform.
Any parting thoughts for the community?
Brian — 52:45
I have one parting comment. There has been a couple of questions about Euler.
People have thought quite sympathetically about Euler, and you know, my heart breaks for those guys. I don’t think the game is over for them. They’ve got a very good profile, and if they can address these issues, they may very well recover from this. And if they do, well, that’s a good thing for DeFi. If there’s a number of platforms available in the DeFi ecosystem, then that draws a greater number of users.
In line with the thesis of spreading one’s assets across different platforms, I think there’s merit to something like Euler being in place. So I wish them the very best, and again, my heart breaks for them.
Carlos — 54:50
Yeah. Euler had very skillfully built a product that people actually wanted. There is no reason not to think that product can recover and can be offered to people with additional security features. In the DeFi ecosystem, we have to hope that that’s the case and that people do not de-estimate good products altogether because of an issue that happens one time, even if that’s a $200 million issue.
Brian — 55:11
With v2, we’ll give you updates as we get closer. I anticipate handing the smart contracts over for audit within the next couple of weeks. So we’ll see what comes out of all of that. That will be an exciting process. It’s always fun being pulled over the coals by the auditors, but it’s something we enjoy. So that will be good fun.
Carlos — 56:10
Yes, you heard it here first, folks. So don’t forget to go and tell everyone what Brian just said. Thank you very much again to those who joined, and thank you for the questions. See you later.