In this episode of SCB 10X which took place on May 23, 2024, Akshat Vaidya from Maelstrom Capital hosted Tascha from INIT Capita to discuss revolutionizing DeFi money markets through liquidity hooks, the mechanics behind liquidity hook strategies, how they can benefit retail users and DeFi protocols alike, scaling plans for INIT Capital, and more! Read our notes below to learn more.
Background
Akshat Vaidya (Host) – Head of Investments at Maelstrom Capital
Tascha (Guest) – CEO & Founder of INIT Capital
INIT Capital – Liquidity Hook Money Market
INIT Capital’s Liquidity Hook and Real-Life Applications in DeFi
- Tascha introduces herself as the founder and CEO of INIT Capital. She explains her background in DeFi since 2020, including her work with Alpha Finance and Alpha Venture DAO.
- Tascha describes INIT Capital as a liquidity hook money market. She explains that a Liquidity Hook is a highly composable plugin for liquidity that any DeFi project can use to access liquidity without needing to bootstrap it themselves.
- Akshat asks for a simplified explanation of how a liquidity hook works, requesting a real-life example from both retail and DeFi project perspectives.
- Tascha provides an example of a liquidity hook built in collaboration with Ethena. She explains that users can earn up to 100X of SATs (Ethena tokens) in one click, along with additional yields.
- Tascha details the process: with a $100 deposit, $400 is borrowed, totaling $500 which is swapped into USDe. The $500 of $USDe is then collateralized back onto INIT, giving users access to 5X their original capital in one click.
- Akshat asks who creates the liquidity hooks and if anyone can link different DeFi protocols with these strategies.
- Tascha explains that anyone can create a liquidity hook permissionlessly, but it’s often done by the developers of each protocol as they are familiar with their code and goals.
- Tascha elaborates on the flexibility of INIT Capital’s architecture, allowing protocols to pick and choose different components to create hooks that optimize for specific goals, such as increasing TVL while maintaining utilization rates.
- Tascha uses Ethena as an example, explaining that their goal was to ensure $USDe adoption, trading, and liquidity provision across different DEXs, which led them to create looping hooks.
Understanding INIT Capital’s Role in DeFi Accessibility and Protocol Growth
- Akshat asks Tascha about the type of retail users that would benefit most from INIT Capital.
- Tascha explains that INIT Capital aims to lower the barrier to entry for DeFi and make it more accessible. She describes how INIT simplifies various DeFi opportunities for users, catering to different risk appetites from beginner to advanced DeFi users.
- Tascha mentions that each hook on INIT summarizes its function, risks, benefits, APY, and ROI in a quick infographic, allowing users to make informed decisions based on their risk tolerance.
- Akshat confirms with Tascha that there’s a dashboard where users can assess the risk of different hooks.
- Akshat inquires about protocols’ ability to see the systemic risk they introduce.
- Tascha explains that there are two types of collaborations: additional features to a protocol’s core product (like Ethena’s $USDe adoption strategy) and integrations inherent to a protocol’s core offering. In the latter case, protocols can assess risks as they build the hooks themselves.
- Akshat asks Tascha about her motivation for creating INIT Capital.
- Tascha cites two main reasons: addressing the problem of DeFi protocols fighting for liquidity and enabling protocols to achieve various objectives quickly and easily.
- Tascha provides examples of how INIT can help DEXes add margin trading or curve and leverage trading without extensive integrations. She also mentions how protocols like Ethena can ensure adoption when expanding to new chains.
- Tascha explains that INIT Capital matches end users’ desire for an all-in-one platform to access various DeFi opportunities with protocols’ need for easy functional layer creation and liquidity bootstrapping.
- Tascha describes how this creates a flywheel effect: more integrated protocols lead to more hooks and one-click strategies, attracting more users, which in turn attracts more protocols to INIT, resulting in an active ecosystem.
INIT Capital’s Growth Strategy, Challenges, and Vision for the DeFi Future
- Akshat asks Tascha about the key metrics or KPIs used to assess INIT Capital’s success.
- Tascha mentions three main metrics: TVL, number of integrations, and number of protocols benefiting from INIT Capital. She highlights that they track not just TVL, but also the actual value and contribution to end users and protocols.
- Akshat inquires about INIT Capital’s scaling plans for the next 6-12 months.
- Tascha shares that they’ve been building on the infrastructure side, extending INIT to support more functionality and protocols. She describes their vision of a DeFi infrastructure where anyone can launch a DeFi protocol or add new functionality to existing protocols in minutes.
- Tascha explains that this infrastructure aims to change how DeFi protocols are launched, deployed, and updated, addressing issues like forking and potential loopholes.
- Akshat asks if there’s any existing business model similar to what INIT Capital is building.
- Tascha compares their upcoming platform to Altlayer, but for DeFi primitives. She explains that their platform will allow rapid deployment of entire protocols or new functionalities, speeding up go-to-market strategies in new ecosystems.
- Akshat asks Tascha what keeps her up at night regarding INIT Capital.
- Tascha cites security as a primary concern. She describes their robust internal and external security measures, including monitoring systems, risk frameworks, and leveraging external companies for automatic warning detection. She highlights the need to constantly update their systems to reflect new risk considerations in the evolving DeFi landscape.
- Tascha expresses excitement about moving beyond low-level infrastructure to innovate in the DeFi ecosystem layer. She discusses the need to redesign how DeFi is built to move the industry forward, focusing on creating a layer that allows faster and safer development of DeFi primitives.
- Tascha envisions a future where developers can focus on new problems and products instead of reinventing DeFi primitives. She sees INIT as a showcase for this larger vision, enabling protocols to easily add functionalities and access liquidity, with the ultimate goal of allowing anyone to build a DeFi protocol in minutes.
Sustainability of Points Programs, UX/UI in DeFi, and INIT Capital’s Approach
- Akshat asks Tascha for her views on the sustainability of points programs and what’s next in that world.
- Tascha explains that points are another form of incentives, possibly with more speculation due to their pre-launch nature. She sees incentives as inherent to DeFi, especially while earning yields remains a primary use case.
- Tascha describes points programs as an interesting way for users to learn about, use, and become accustomed to protocols before token launches. She notes that this approach helps align users and protocols earlier but can present challenges if protocols lose user engagement after token launch.
- Tascha highlights the importance of having a good product and a solid post-token growth strategy to retain users attracted by points programs.
- Akshat asks specifically about how INIT points work and how they interact with liquidity hooks.
- Tascha explains that users can earn INIT points through various activities: using the product (lending, borrowing, using hooks), referring others, and participating in community quests. She highlights that the points system aims to involve users in INIT’s journey and drive the platform’s flywheel effect.
- Akshat brings up the topic of UX/UI improvements in DeFi, asking Tascha what’s improving and what still needs work.
- Tascha discusses the varying approaches to UX/UI in DeFi, noting that some protocols focus on catering to existing DeFi users rather than simplifying for newcomers. She mentions improvements in wallets and tools for onboarding new users.
- Tascha suggests that protocols should consider offering both pro and intermediate versions or provide clear infographics and educational materials to guide new users.
- Tascha provides the INIT Capital website as the main point of contact, mentioning that links to their Twitter and other platforms are available there. She notes their active presence on Twitter and invites people to join their Discord for more engagement.
Check Out These Important Links
- Listen to the original audio
- Follow Akshat Vaidya on Twitter
- Follow Tascha on Twitter
- Follow Maelstrom Capital on Twitter
- Follow INIT Capital on Twitter
Show Information
- Medium: YouTube (Video)
- Show: SCB 10X
- Show Title: Init Capital & Revolutionizing DeFi Money Market with Liquidity Hooks
- Show Date: May 23, 2024