Announcing Beta Finance: Facilitating market stability & offsetting volatility
Creating innovative infrastructure in DeFi
Introduction
The DeFi ecosystem is still in its early stages. One of the major problems we see with the current landscape is the extreme price volatility in many crypto assets, which rapidly jump 1000+% in price within a short timeframe, only to crash soon after.
The catalyst for this high speculation is often due to a virtuous cycle projects employ, where they offer very high yield farming rewards, incentivizing farmers to buy more of the token to farm even more, and thus driving yields even higher to trigger more buying.
The extreme price volatility triggers instability, and harms the long-term adoption of DeFi by both retail and institutional users. The volatility and excessive growth in price catalyzes excessive leverage, panic selling, and liquidations — all detrimental to the DeFi ecosystem. We recognize the need for a counter-balancing force to this volatility in order to facilitate the healthy adoption of DeFi in the years to come.
This problem isn’t unique to DeFi; TradFi also experiences short-term volatility with excessively inflated equities and derivatives. To provide a countering force, traders, financial institutions, and banks initiate shorts, borrowing the asset to sell immediately at the inflated value and buying it back at a more reasonable value. This mitigates the upward pressure and allows the market to function efficiently. We see short selling tooling as a critical piece of financial infrastructure that is urgently needed and absent in DeFi right now.
Introducing Beta Finance
Beta Finance is the first permissionless money market protocol for lending, borrowing, and shorting any crypto asset. We are the first incubated project of Alpha Launchpad, DeFi incubator arm of Alpha Finance Lab, and are backed by some of the most reputable investors in crypto. Our mission is to build the tooling and financial infrastructure of DeFi to offset volatility and facilitate the long-term healthy adoption of DeFi.
Money markets exist, but they are built for different purposes
Money markets exist for borrowing and lending major crypto assets, but none of them provide the tooling to initiate a short position. Again, short-selling is a key tool to offset crypto volatility and bring market stability. The status quo in DeFi for initiating a short position is unnecessarily complex right now. The current lifecycle of a short position, if that asset is even supported on any existing money market, is:
- Identify the desired token to short
- Find a money market protocol that supports this token, post collateral on the protocol, and borrow the short token
- Swap the short token to a different token, e.g. stablecoin, that will be held long
- Manage positions through a spreadsheet, tracking price, borrow APY, liquidation risk, etc.
- Initiate a close on the short position.
- Calculate amount of short token needed for repayment, and swap some current token to the short token
- Repay the debt on the short token to the money market protocol and take back collateral.
As the prices fluctuate, borrow APYs change, and number of positions increases, managing your positions in DeFi becomes exponentially harder. DeFi users need to be knowledgable about interacting with multiple protocols, calculate values manually, and wait minutes to get through the necessary disjoint transactions. It’s a terrible experience.
How Beta Finance solves this
Beta Finance makes initiating a short position as easy as clicking a button, and provides a simple dashboard to manage all your positions. All users need to do is supply collateral, decide the amount of an asset you want to short, and confirm the transaction. In the background, Beta will borrow this shorted asset for you through the money markets on the protocol and initiate the position. There’s no need for a DeFi user to interact with multiple protocols and execute multiple transactions with high gas fees. Beta delivers an integrated and seamless short selling experience for DeFi users and plays a key role in offsetting crypto volatility.
Existing money markets neglect >99% of crypto assets
DeFi users are limited in their options when shorting. As explained earlier, in order to initiate a short position, someone needs to first borrow the crypto asset to be shorted, thus a money market needs to exist for that asset.
Existing popular money markets have a limited number of tokens supported, around less than 30. These supported tokens are popular and considered less volatile, leaving the more volatile assets (that traders are more likely to short) unsupported. For reference, there are 1000+ actively traded pairs on decentralized exchanges alone, and < 1% of these tokens have money markets.
How Beta Finance solves this
Beta Finance is able to securely support money markets for all tokens; this means both popular, less volatile crypto assets and more volatile crypto assets. Moreover, the permissionless nature of Beta allows anyone, anywhere, anytime to create a money market for any crypto asset. A money market for our favorite dog coins — renDOGE and SHIBA? You got it. A money market for MKR? MATIC? SNX? SUSHI? ALPHA? You can create it. This means that you can also start earning risk-free yield (up to 1000% APY) on any token you hold by lending it on the Beta protocol. As the DeFi ecosystem grows larger and larger, we wanted to create a money market that is able to scale with it.
Building a stronger future for DeFi
We’re building Beta Finance for the DeFi community and solving the unmet needs of users. Just as how β is a measure of volatility in finance, Beta Finance aims to offset volatility. By providing critical short tooling, which facilitates market stability, and empowering users with creating money markets, Beta Finance is focused on its mission to improve DeFi infrastructure and further its mainstream adoption.
We’re thankful for the support we have received from Alpha Finance Lab through Alpha Launchpad, advisors, investors, and DeFi community that have helped us on our journey. We will be shortly releasing additional information on the ecosystem, partners, and our protocol, so stay tuned and hit the Follow button on Medium and Twitter! If you have any ideas, questions, or want to just chat with the Beta Finance team, join our Discord and Telegram groups! We’re excited to have everyone on board for the future of DeFi.
We are hiring!
Beta Finance is looking to expand our team and is actively hiring. If you are passionate about DeFi and excited to build the next generation of infrastructure for DeFi, we’d love the chance to learn more about you! Whether you’re a Solidity developer, Web3 magician, DeFi strategy specialist, or crypto community meme lord, please reach out to careers@betafinance.org.
