Recap of Our Recent AMA in the Chinese Telegram Group IOTAmoon

We recently had the opportunity to take part in an exciting Ask Me Anything (AMA) session in the Chinese Telegram Group IOTAmoon. The event was organized and hosted by Kowei, the esteemed Asia Ecosystem Lead of the IOTA Foundation. We extend our sincere appreciation to Kowei for this great AMA that left us with a renewed sense of great interest in the team, products and journey of Nakama.

We were fortunate to receive numerous excellent questions and are thrilled to present the most notable questions, along with our corresponding answers:

Q1: Could you please briefly introduce Nakama and yourself?

We’re Rob and Daniel, Co-Founders of Nakama.

Rob became interested in Crypto in 2015 while trading virtual game items for bitcoin and fell down the DeFi rabbit hole in 2018 whilst following his interest in finance which he had a 15 year career in Private Equity prior to launching Nakama as a Co-Founder 1 year ago.

Daniel entered the crypto world in 2012 and started studying how Blockchains work in 2013. Coming from a technical background, in 2017 he got interested in IOTA and its implementation of a DAG as data structure instead of the typical blockchain with its known limitations. Since then, he developed projects to interconnect IoT devices with IOTA’s tangle such as XDK2MAM and IOT2TANGLE. In the last years, DeFi got his attention and he started working on different dApps in that area.

Nakama is a thesis-driven, long-term focused builder and venture fund. We partner closely with the projects we invest in or incubate and actively participate in their governance, community-management and adoption. Our mission is to create value for all stakeholders and help crypto move away from value extraction, towards value creation and sustainable token economies.

Unlike most VC’s we’re self funded and have yet to seek investment from the community, we’d rather create long term value with all our stakeholders which includes users, investors, team, liquidity providers and partners

We’re unusual in that we focus on both investment and web3 building.

Q2: How many projects will be incubated by Nakama? What is the scale of assets you manage?

We’ve publicly announced three projects:

Deepr.Finance — a decentralized lending market

Accumulator — a decentralized yield aggregator/compounder

Genie’s Bounty — a proof of concept web3 on chain randomised game

We have a significant sized team of close to 20 people and are developing additional projects which we hope to share with the community shortly.

In regards to the amount of assets we control that is not public information, however we are self funded.

Q3: What is the team composition of Deepr, and for example how many people are working on developing Deepr?

Nakama Labs currently has almost 20 talented developers, designers and communicators. Each project we develop is approached by our backend, frontend, artistic and comms teams. We generally regulate how much bandwidth we allocate depending on our goals, and always assign a lead per project within each team.Right now Deepr core team is composed of 3 devs (back/front/devops respectively) and 3 artists and communicators. It’s important to highlight that, most of our team is familiarised with the Deepr protocol, so we are able to assign more talent to the project in the near future, when we plan to release some new features.

Q4: Briefly introduce Deepr: Why Choose Compound Fork Over Aave Fork? Will Deepr Have Any Special Design?

Deepr.Finance is a lending market, it allows you to provide liquidity/collateral which earns a passive income whilst using that position to take out a debt position without the need for a centralized party such as Celsius for example.

We chose to fork Compound because it’s a simpler and we believe safer set of code to fork as evidenced by the number of teams who have forked Compounder over Aave in the past.

Deepr has a unique user interface which focuses on additional user friendly features such as the lighthouse which gives a simple to understand visual aid for your debt risk position. We will develop additional features such as staking and other yet to be announced features in the future.

Here you can find the audits the protocol had over the years:

https://docs.compound.finance/v2/security/

We are taking the audited code verbatim and only adding some contracts related to our tokenomics model. These added contracts were audited by Hashex:

https://hashex.org/audits/deepr-finance/

Q5: Will Nakama or Deepr NFTs be integrated into the economic framework or included in the staking functionality?

We currently have no plans to stake our NFTs, that’s not to say we won’t look at this feature in the future. It’s worth noting that Nakama NFTs will have some form of utility added for each project we launch, for example perhaps a small token allocation, early access, discord privileges etc.

Q6: Will there be future expansions to include other chains?

We plan to launch on ShimmerEVM first because there are a number of advantages for us as a team to do so including:

• Connections and Partnerships within the ecosystem
• Unique ShimmerEVM features to build out such as; No MEV, on chain randomness, L1 feeless transfer to name a few
• Large community which we’ve been a part of for many years

That being said, we do plan to migrate to other chains in the future once we’ve built momentum on ShimmerEVM and increased our features which will make us competitive on other chains. I believe in a multi-chain future where each chain has unique advantages and can build a niche within the web3 ecosystem and we’d like to support the very best ecosystems in web3.

Q7: One important aspect of lending protocols is the liquidation mechanism, and currently, the SMR EVM ecosystem is still relatively small. How can this be avoided to prevent difficulties in liquidation due to poor on-chain liquidity? Will there be a reserve fund available for liquidation purposes?

At Nakama we take risk and security very seriously which is why we’ve talked about this topic several times already. It’s important that we mitigate as much risk as possible, specifically in regards to liquidation risk which refers to the availability of liquidity to liquidate large collateral positions to secure debt we’re implementing the following:

We’re the first ShimmerEVM project to implement on chain pricing oracles from Pyth so we get the best pricing information to feed our liquidation model which will be used together with onchain dex data. We’ve not stopped there and are also looking to implement an additional oracle provider as another backup fail safe.

• We’ll only accept the very best assets as collateral for lending markets which will be decided based on; a) price volatility, b) team c) liquidity on chain
• To start with we’ll be rolling our Deepr with training wheels on which allows us to monitor on chain liquidity and limit collateral and debt positions to ensure we don’t run into bad debt risk
• Ensure we audit our code and use battle tested forked code

Rob: Security and risk are not the most interesting features but they are our number one priority as a team. Also part of the platform’s reserves are destined to cover bad debt scenarios that will hopefully never be used.

Daniel: I would like to add that, for some known markets we are utilizing the same collateral factors and parameters as Compound. These have been battle tested and proven to be solid.

Q8: As Nakama plays the roles of both a venture capitalist (VC) and a builder, could this potentially create conflicts in investment projects? For example, if there are already investments in lending projects, will there be an avoidance of further investments in similar lending-related projects?

Rob: I see this as an advantage as it allows us to make investments and build projects which can guarantee close partnerships, interoperability between projects within web3 is crucial for growth and success and we’re planning to use our resources to create successful ecosystems for all stakeholders. We do however need to ensure we have a balanced portfolio and to diversify across a number of different web3 projects. I don’t see this as a conflict of interest and would exist even if we only focused on building or investing.

Q9: From a VC perspective, how do you differentiate between investing in tokens or equity? Are there any notable differences between the two?

We’re open to investing in both equity and tokens, although the process of carrying our due diligence on tokens vs equity is different. The largest difference between the two is there are less legal protections for token holders vs equity however there’s far more flexibility to use tokens to incentivise web3 behaviours which benefit the dApp and ecosystem such as liquidity incentives.

Rob: It’s fair to say that currently we’re focusing more of our efforts on developing web3 applications, this is because we believe there’s a lot of opportunities within the ShimmerEVM ecosystem and we want to play a core role in providing foundation level dApps for the community. With regards to short term cowboy investing (pump and dump) etc, this is not a strategy we promote, we are looking to create long term value for all stakeholders and its clear lessons need to be learnt from previous bull markets. Key is creating sufficient value and utility in the tokens to ensure they become attractive to hold long term.

Q10: As an IOTA & SMR & ASMB venture capital and incubator, how do you plan to collaborate with the iota foundation? Do you consider conducting project reviews together or using the iota foundation’s review as a basis for evaluation? What are the key factors in Nakama’s project review process?

We have a good relationship with the IF and share feedback in regards to bug reports and ideas which is mutually beneficial. That being said I don’t believe it would be fair for the IF to carry out project reviews and evaluations. In regards to how Nakama reviews projects we have a medium series coming out shortly where we’ll cover this in more detail, a few areas we’ll cover are:

• Team
• Tokenomics
• Security
• Utility
• Community

Q11: In addition to funding, what other resources does Nakama provide to incubated projects?

We provide advice in a wide variety of areas including tokenomics, branding, team, development assistance etc. We provide contacts and partnership opportunities within the development community. We’ve also assisted projects which we don’t have an investment in, as we want to assist the wider development community to ensure ShimmerEVM is as big of a success as possible as we believe we’ll benefit indirectly from a larger ecosystem.

Rob: We wouldn’t invest in a project if we didn’t feel we could provide additional value by supporting them and we’re in a unique position to provide a lot more value with our knowledgeable dev team.

Q12: What is Nakama’s ultimate vision? Is it solely focused on finding promising projects to support, or does it aim to build an ecosystem through collaborative projects?

For us to create long term value for all stakeholders within web3 ecosystems, when I talk about stakeholders I mean; the users, liquidity providers, team, partners and investors. It’s critical all stakeholders are incentivized for the success of each project to ensure there is long term value.

Q13: Using only one oracle is a danger when the oracle malfunctions, just like the LUNA event. Will Deepr use more oracles like Chainlink, and are you ready to cope with oracle malfunction?

Rob: LUNA did not crash because of one oracle but because of its ponzinomic design. That being said, we are looking at implementing an additional oracle provider as a backup.

Daniel: Hey, yes. When running some DeFi protocols oracles are a sensitive instance and you want to -at least- have a solid first option and a fallback you can use if you detect that your first option is behaving incorrectly. Right now Deepr runs Pyth and we are integrating Redstone as a fallback. We are very aware about the need of several oracle providers available on ShimmerEVM and we think that, with time others such as Chainlink will also be available.

Q14: When considering starting to develop projects in DeFi, there is a lot of work involved, such as community management, contract development, and frontend development. Do you have any suggestions for individual developers? It is not always possible to find a team from the beginning, and trying to do everything alone can be overwhelming and distracting.

Rob: I would suggest you reach out to the Touch Point team who speak with most devs in the ShimmerEVM space for support and contacts.

Daniel: I would suggest researching existing protocols that are of interest for you and start by forking one that includes all needed instances (contracts, subgraphs, frontends). This is a very educational process and will allow you to grasp how complex a project can be without having to cover all the fronts yourself, which is impossible tbh.

Q15: In ETH DeFi, there is a tradition of not accepting USDT as collateral. Will this practice be inherited in the Nakama ecosystem, or will we consider USDT as a good stablecoin as USDC?

Rob: It really depends which stablecoins have the most liquidity within ShimmerEVM as to which will be the most supported, we have plans to support both USDC and USDT however one may become more dominant

Q16: What style of web3 game is Genies Bounty, and how does it differ from previous web3 games?

Daniel: Genie’s Bounty is just a proof of concept to showcase how ShimmerEVM can produce true randomness on-chain through the protocol getEntropy() function. We do not intend to further develop it, but we wanted to open the “free randomness” doors to other GameFi products that may run on other chains and are currently paying for randomness through services such as Chainlink VRF.

Rob: Genie’s Bounty is a proof of concept. We wanted to design a game which could use the on-chain randomness USP from ShimmerEVM to create something fun. This concept can be forked by other teams wishing to build random on chain games.

Q17: Could you please talk about Nakama token economics here in AMA? Though we know that you will release a Medium article in the future. Will there be only one token for those projects, or one token for each project?

Rob: Nakama is our VC builder fund, there are no tokenomics at this level. For the projects we’re building, Deepr, Accumulator etc they will have a utility token and tokenomics for Deepr are available on Medium.

Daniel: The Deepr tokenomics are amazing. Rewards on DEEPR tokens are huge from the start and will decrease in time so this is something you guys may want to try once we are out on mainnet. You can get tokens only by supplying liquidity. No need to take a borrow, although the system is designed to issue live rewards per engagement (the more you use the protocol, the more DEEPR tokens you get).

Q18: What are your thoughts on the fact that currently over 30% of CRV has been used by borrowing projects to convert into USDC? Has Deepr taken this scenario into consideration?

Rob: I think all lending protocols need to manage liquidity risk for all markets, I don’t want to talk negatively about Aave; however we would have implemented other controls such as collateral/debt limits and selection of assets as discussed earlier in this AMA.

With the success of this AMA session and the remarkable engagement from the community, we eagerly anticipate hosting more enlightening AMA sessions in the future. The overwhelming response and the quality of questions received have inspired us to continue fostering open dialogues and knowledge-sharing opportunities. Stay tuned for upcoming events where we can explore new horizons, address burning inquiries, and further strengthen the bond within our community.