Why Has No One Created a Stop Loss for DeFi?

An ode to DeFi’s UX and what’s still missing (part 1/2)

You’re probably interested in “DeFi”, but we’re here to tell you that you’re probably performing sub-optimally.

It’s December 2020. You now have everything from DEXs (dex.blue), to AMMs (Curve and Uniswap), to mesh network price fillers (0x), to meta DEX aggregators (Matcha, 1inch, & Metamask). You have synthetic assets, liquidity mining schemes, interest-earning stablecoin schemes, and automatic liquidation protection. You can enter into automatic yield farming protocols (in some countries), social trading contracts, and money lego builders. You can get price notifications on your phone with Blockfolio. You can buy NFTs on Rarible, Async, or OpenSea you use with Trust Wallet or Argent. You review your order history on Zerion. You keep your assets on a Trezor cold wallet. You use Trading View for charting and Binance as a centralized on-ramp. Yet, something is missing.

We call what’s missing the Last Mile of DeFi UX — it’s about making this painless.

Because, whether you have $500, $500k, or $5m, you’re not effectively managing risk.

For example, here’s a situation:

You’ve just bought into a project like Orion Protocol ($ORN) or Thorchain ($RUNE) because you think the projects have significant potential. You know these prices are essentially beta assets of Ethereum and behave with some correlated multiplier of what’s happening in ETH. Essentially their prices reflect the psychological and real buy/sell pressure of ETH.

As an oracle, decentralized liquidity sources like DEX AMM pools, notably Uniswap, serve as a mechanism for price discovery. You know traders are expected to arbitrage information asymmetry and inefficiencies between the centralized price metrics and a decentralized market supply/demand.

So now you’re trying to swap ETH for ORN or RUNE. You trust that these DEX markets

1. Have appropriate liquidity
2. Accurately reflect the real price balance
3. Won’t steal your funds
4. You won’t get front-run or your transaction fail

When you perform this swap, probably on Uniswap (but also Sushiswap, Mooniswap, or Balancer) you essentially forego the convenience of centralized management for price discovery, order routing, order management, and trade clearing for an on-chain alternative. You need tools like Uniswap’s own uniswap.info to give you better indicators on pool activity and fees. Else, how will you know if you’ve made any money on that position?

So by playing in the DEX world, you’re doing everything manually and by yourself. You want to perform a trade? Good, then set a limit order on 1inch and pray to god they can profit from internal price arbitrage so they fill your order. Did your order fill? Good, but now you realize you lost 10% of your relative holdings with that swap so you’re in debt to return to your starting position.

You effectively don’t have a way to determine prices and forget that you did. You’re forking over massively valuable cognitive capacity, time, and losing assets that could be spent on any number of things because of existing UX inefficiencies despite all the extremely gorgeous UIs, contract audits, and toys that have emerged from the DeFi summer.

The decentralized exchanges that have caused the shift of over $500 million USD in assets this year alone lack the tools necessary to let lose the floodgates of $TSLA Robinhood meme traders. One such tool is a stop-loss mechanism.

Stop losses protect profits and automate an exit when markets fall beyond a certain threshold. Stop-loss orders are usually only available to highly technical traders, technical teams, and crypto hedge funds with in house developers. However, even some VCs, funds, whales, and nontechnical traders, across institutions and retail alike, lack these essential product features.

Dexible is about to change the game.

Read Part 2 here.

👉 Join our Dexible Telegram

👉 Join our Dexible Discord

👉 Follow our Dexible Twitter

👉 Subscribe to our new Newsletter