The double, triple and sometimes even quadruple-digit yields in decentralised finance are so outrageous that compounding can become an issue.

To earn an optimal rate of return, customers generally need to harvest their interest payments and re-deposit them, often as frequently as each day.

Thankfully platforms like Beefy Finance have emerged to automate this process, with vaults that autocompound users’ gains automatically in exchange for small performance fees.

The platform has attracted US$672 million in total value locked (TVL) since its launch late last September, according to Defi Llama.

Beefy last month launched Moonpot, a lottery-like game on Binance Smart Chain, and last week integrated it with Chainlink‘s random number generator to make the prize pools more secure and trustworthy.
 

Meet Mooncow

To learn more, Stockhead last week talked via Zoom to “Mooncow,” the pseudonymous head of communications at Beefy.

Stockhead: So can you tell me about Beefy and how it came to be?

Mooncow: So the origin story of Beefy is people not with a finance background, but  with a development background, realizing that some things were being built on Ethereum that had the potential to really open up DeFi (decentralised finance) to the masses.

But there were limitations on Ethereum, in particular with the high cost of transaction fees. Everyday users were really locked out from participating in the opportunities on Ethereum from 2018, ’19 onwards.

So this promise that you see of DeFi, of breaking open the banks, creating value where value was held by big players from the past, couldn’t really come to fruition on Ethereum.

Because you had to be so rich, already, to be able to use some of those platforms.
 

Fulfilling the promise of DeFi

So, the Beefy developers took an opportunity that already existed on Ethereum, there were projects that were already doing some of this yield optimisation, and built on Binance Smart Chain.

Binance Smart Chain was released by Binance in September of last year and reduced the fees drastically.

It’s built on exactly the same open-source technology and has its own governance, but basically allows you to do anything that was being done on Ethereum on a much cheaper and faster chain.

And so what this did was sort-of fulfil the promises of DeFi — making it permissionless, actually giving access to investment opportunities that for whatever reason people in many, many countries don’t have access to. For some, they don’t have enough money to start an account, or maybe those sort of accounts, those kind of trading opportunities just don’t exist for your everyday use.

And then the second thing is much more the fair distribution of the value within the system. One of the major disruptions that have has happened is the decentralised exchange space.

We’ve democratising market makers. Basically, the five biggest hedge funds in the US are the market makers on the New York Stock Exchange, and they’re like a boys’ club.

There’s no way into that, there’s no way to share that value. So you have some of the biggest funds in the world, just printing money for themselves, basically, offering this monopolised market making.

The developers realised it doesn’t really have to be like this, so they created a new way to offer liquidity through automated market-making [the algorithmic trading process that powers all decentralised exchanges such as Uniswap, Sushi and PancakeSwap].
 

Redistributing value to all

This is completely permissionless, and because it’s transparent, it’s much harder for an entity in the middle of these operations to funnel value and profits just into their own pocket. Because everything is trackable on-chain, you know if one product is taking 10 per cent of your value creation every day, someone can create another one that transparently shows they’re only taking nine per cent or five per cent.

And they’re redistributing value to everyone who’s using the platform.

So what this has created is two things. One is the opportunity to be something like a market maker, and two is for that market-making opportunity to actually be quite lucrative because the exchange itself is not taking that value.

And so what Beefy did was to take these existing needs — the number one being liquidity. These platforms like PancakeSwap have several billion dollars in value locked and a market cap of around US$3 billion, and have around a million active users every month.

These platforms, they run on liquidity. They don’t have market makers sitting on the side of the trade. They have to find a way to build liquidity. And they do this by rewarding the users for depositing funds on both sides of the trade.

So you would hold half BNB (Binance Coin) and half BUSD, or half BTC and BUSD, and you’re getting rewarded for that by a platform like PancakeSwap.

But they reward you in a way that is not optimal. So they will give you the tokens on a daily basis, but you have to withdraw them, you have to claim them, and then you have to put them back in again. There is a cost per transaction and as a small user, that can be quite expensive.

If you’re only playing with $10, and you’re making a $1 transaction every day, you’re not gonna grow your pot.

And so what Beefy did was take these needs and these opportunities and wrap them up into a fully automated system. So people can come and just deposit their BTC once and they know it’s gonna keep growing for the rest of the year.
 

Why aren’t more people in DeFi?

Stockhead: Sure… it’s pretty phenomenal, people in the traditional finance world are getting 1.5 per cent interest rates, and then in DeFi, you’ve got this space where people have to compound their gains once a day — or maybe even every few hours for some of Beefy’s pools?

Mooncow: Even for stablecoins, you put it in the right vault on Beefy, you can earn 20 to 30 per cent on your dollar. It’s not something where you have to learn about these crazy food tokens — it’s basically the best thing you can do with dollar value on the planet.

It’s quite interesting, that being the case, why more people are not doing it.

That’s a mystery that we’re all trying to solve and onboard more people into DeFi.
 

An anonymous team

Stockhead: So can you tell me about the team?

Mooncow: We’re all anonymous. It’s an engineer-led team, especially Beefy. I would say Moonpot is more like a product that’s grown out of the platform that the engineers have created.

And it’s a fascinating way to work, because we don’t even have voice meetings, everything is text, everything is documents, and we have great friendships within the team, but we are just all avatars somehow.

Stockhead: And can you tell me about your background?

Mooncow: Without revealing too much, I’ve worked at some of the biggest crypto companies, big centralised exchanges and mining pools and things like that.

Stockhead: Would you want to say where you’re based?

Mooncow: No. (chuckles)

Stockhead: (laughs) Okay. Can you tell me how many people are involved?

Mooncow: Sure. So the real core team of Beefy — which I’m not, I joined the project four or five months after it launched — that’s around for four core developers that really like built it and they got tokens and they vested for … I think the longest vesting is like 21 months.

[Beefy’s governance token, BIFI, was trading yesterday at US$1,125, up from around US$80 at the beginning of the year. At its current value, the coin has an US$80 million market cap, making it the No. 405 crypto]

So they’ve made a lot of money, but they are also still there for the team. And then beyond the core team is 10 or 12 people that are working full time on Beefy stuff, a mixture of developers, moderators and marketers.

And Moonpot has a similar makeup — three or four Solidity front-end and back-end developers, and then an army of moderators and marketers.
 

Moonpot and UK Premium Bonds

Stockhead: Cool… so tell me about the Moonpot, is it’s almost like a lottery? Would that be a fair way to describe it?

Mooncow: Lottery is kind-of a protected term, which has a technical legal meaning of buying a ticket, but in many senses, it feels like a lottery.

You wait every month or every week for a big price draw, but instead of buying a ticket it’s more like the English model of Premium Bonds, where you put your assets into something, and then maybe every month, you win.

And in Premium Bonds, you can withdraw your deposit, so you’re not paying for a ticket. And so what Moonpot does is kind of evolve this one further: we don’t just give you a price, we also give you very high interest rates.

And we’re able to do this because the assets that we focus on already generate very high interest rates.

So the CAKE token, which our launch was built around, has 100 per cent APY. We take half of the APY and we give that back to the user, so you’re earning like 50 per cent interest on your asset, and the other half we use for this prize pool.

And that’s why it’s win-win, because you keep your deposit, you earn interest and you also have this chance to win a prize. The first week someone had staked 10 CAKE, which was about a hundred bucks, and they won $15,000, and they got their hundred bucks back as well.
 

Why DeFi is unstoppable

Stockhead: Wow, phenomenal. Do you have any predictions on where you see this going in the future?

Mooncow: I think DeFi in general has quite a solid foundation because it’s built on things that already existed.

It’s taken market making, it’s taking lending and borrowing markets, these are the two most successful I would say within DeFi.

Some people have tried to do things like insurance and futures and stuff, and it’s not quite got as much traction yet.

But trading, there’s always going to be a need for. And borrowing and lending, there’s  almost certainly always going to be a need for.

And the technology and the business logic that platforms like Beefy, like PancakeSwap have brought to this is kind of unstoppable.

It’s unstoppable open-source code on an unstoppable network with the most liquidity and most equal access that you’re going to get for any market.

So it’s going to become the hardest thing to manipulate.

And it might seem crazy to say that when you have all these regulators on the side of the traditional markets. But one of the reasons you need such a heavy presence of regulators, is because it’s so possible for these closed shops to mistreat their users or mistreat the traders.

Because the blockchain is so transparent, you don’t need a regulatory energy to maintain these systems.

And I think the liquidity will, therefore — maybe quickly, maybe slowly — be just dragged in through gravity.

Because unless you’re a manipulator, you want to trade in the fairest place going.

So the money is going to end up there.

And so therefore I think trading, borrowing, lending, optimising those yields, what Beefy  does, is not going away.

And I think the same level of intelligence that created these new ways of borrow and lending, new ways of providing liquidity and market-making will also find inroads into other financial systems

I only learned about market-making because of the people who broke market-making and made it fair. And I think there will be other like financial curiosities that get exposed by these people.
 

Where Beefy is headed

Stockhead: And just going specifically to Beefy, what other products can users expect in the next year or two?

Mooncow: Good question … in some ways, Beefy is so boring that it’s a little bit camouflaged.

It’s just a place to put your assets if want to earn the most on those assets on the planet.

So all that we do really is just keep identifying more asset opportunities, whether that means new assets, whether that means new platforms that are doing liquidity or doing lending, whether that means entirely new chains.

So that will just keep happening. I don’t think Beefy is going to do anything crazy innovative to its core product, but things like this, gamification, are things that can be built on that solid foundation.

We kept Moonpot secret for almost six months. It’s gonna be the same with everything else that we launch.

So yeah, I think innovation right now is so important and it’s working because it’s like this mix, right? The best financial opportunity you can get on the planet, okay, we cut it in half for you. But that still means it’s 50 times better than anywhere else you’re gonna put your asset.

Plus you have this opportunity to win like a quarter of a million dollars every week.

And so we have people playing, one person deposited a million dollars, one person deposited 10 dollars, and they’re in the same thing.

But of course every week when the draw comes we’re kind of rooting for a smaller player as possible.
 

Polygon, Fantom gaining traction

Stockhead: So I’m familiar with Binance Smart Chain and Polygon … but some of the other chains that Beefy is on, Avalanche and Heco and Fantom, I’m less familiar with. Can you tell me how much traction you’re getting on these different chains?

Mooncow: So, it’s interesting because Polygon was actually the most recent one that we added, and now is the second biggest.

Fantom I would say is where the next sort of layer of traction is coming.

And I think the reason why Fantom and Polygon are doing better than say the Heco chain, is that a lot of Ethereum users see Polygon and Fantom as much closer to the original ideas of Ethereum … whereas they are a little bit suspicious of Avalanche, and to a certain extent, Binance Smart Chain.

And it’s because they were not built by the other Ethereum old guard, and I think they just have a bit of influence there over what people with Ethereum assets do.

So Polygon has been extremely successful and the reason why we’re able to grow so quickly on someone like Polygon, and to a lesser extent Fantom is because of our [Binance] Smart Chain reputation.

Projects want to work with us, they want to get their farms up there as quickly as possible, they want to bring their users into Beefy to increase liquidity.

So, when we make a move — we will be adding a couple more chains quite soon — we’re already behind the scenes, making relationships with the foundations that made the chain … or the top projects because the foundations introduce us.

That means when we go live with a new chain we can hit the ground running.
 

Arbitrum launch plan

Stockhead: Can you tell me what chains you’re expanding to?

Mooncow: Yeah, I think it’s pretty common knowledge that we’re close to launching on Harmony. Arbitrum is a definite target for us.

It’s actually more technical than I can get into, it’s above my standing, but Arbitrum seems to be even more adjacent to Ethereum than Polygon and Fantom.

And so we, therefore, have an expectation that the growth on Arbitrum will be even quicker than the growth on Polygon and Fantom.

We already have partnerships so we can launch very strong on Arbitrum.

Stockhead: Yeah, definitely, I think there’s a lot of buildup and excitement for it.

All right, thank you so much for your time.

—

This interview has been lightly edited for clarity.

The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead.

Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

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