Introducing Wallaroo: A new way to earn high interest on your savings
After spending the past two months hacking as part of the Mozilla Builders Incubator’s MVP Lab, Juku Labs is proud to announce the private beta release of Wallaroo, a DeFi (“decentralized finance,” a term for financial products that run on cryptocurrency) app that helps you earn up to 10% interest on your savings.
How it works
“10% interest? Sounds too good to be true,” you say.
We hear you, but it’s not! Like banks, we grow the value of your deposits by lending it out to borrowers willing to pay interest. The difference between us and banks is that instead of fiat–government-issued money like US dollars or Japanese yen–we take deposits in the form of cryptocurrency. The crypto market is experiencing an unprecedented boom, which allows us to offer highly competitive rates. Our rate varies day by day, but the average for the past six months is close to 8% APY. That’s the amount you earn on your deposit each year, so if you were to deposit $1000, in a year you’d have $1080. For comparison, many US-based high yield savings accounts have slipped below 1% APY.
Under the hood, Wallaroo is powered by Aave, an open-source money market protocol on the Ethereum blockchain. Theoretically, anyone can log onto Aave and lend out crypto in exchange for high interest. However, the reality isn’t so simple. Figuring out how to exchange fiat for crypto, how to set up a crypto wallet, and which cryptocurrencies to purchase are just a few of the hurdles a potential user must overcome. The risks are significant, too; without the safeguards provided by traditional financial institutions, a mere typo can result in thousands of dollars lost to the void. We seek to bridge this gap through a simple app that explains each step of the interest-earning process, so users build understanding and confidence along the way.
Why this matters
Equal economic opportunity for everyone, everywhere.
When my cofounder, Yutaro, and I were brainstorming ideas to submit to the MVP Lab, we agreed on one thing: We wanted whatever we built to increase, not decrease, economic opportunity–and not just for people who’d already made it rich mining Bitcoin. Though many grand claims have been made about the practical applications of crypto, the popular image of the space is closer to an online casino dominated by technocrats.
We sought to break that stereotype by offering a low-risk, easy-to-use product for the passive investor. To make good on our mission, we knew that we had to make our product easy to use even for people with no prior knowledge of the space.
What we learned
As part of the MVP Lab, we’ve spent the past 8 weeks sprinting to build Wallaroo. Throughout the journey from sketches to Figma prototypes to a working React/Solidity app, we conducted continuous rounds of user interviews. Our interviewees ran the gamut from DeFi developers to economics researchers to folks whose only experience with crypto involved “the magical ability to turn $1,000 into $10” (their words, not ours!) Along the way, we learned a handful of things about trying to build a crypto product for everyone:
- Set a long-term vision, but stay nimble day-to-day. As a crypto developer, it’s easy to get caught up in the latest rush to capitalize on a new trend. Setting a clear vision ensures that you don’t stray from your values. But when it comes to day-to-day decision making, it’s important to remember that this space changes fast. When we started building Wallaroo in June 2020, the average Ethereum gas price (fees paid to Ethereum miners for processing transactions) was around 30 gwei, which meant that making a deposit would cost about $3 USD in fees. Just two months later, gas prices were hovering around 200 gwei, which bumped the average cost to a hefty $20. Though many of our beta users praised Wallaroo’s professional-looking UI (“I feel like I’m using a big name product,” said one user), that polish came at the price of development speed and flexibility. In the future, we plan to focus less on building a “professional-looking” product and more on iterative development.
- Crypto products are not one-size-fits-all. Depending on who your target audience is, the same smart contract can power a completely different user experience. Even though we had agreed that we wanted our product to be accessible to non-powerusers, we quickly realized that we needed a more specific target market. A step-by-step UI may be great for beginners, but tedious for someone with more experience. On the other hand, a minimalist UI may be efficient for a seasoned DeFi user, but intimidating for a relative newbie. Through our many interviews, we eventually realized that our sweet spot is “crypto-curious” users: people who would like to learn more about or start using crypto, but aren’t sure how to go about doing so. Your sweet spot may be different, but regardless, identifying your target customers early on will enable much-needed focus. If you’re staying nimble, you’ll be able to pivot later if you realize that your target market is different from what you originally thought.
- Give your customers an opportunity to learn. As a new company seeking to handle users’ money, the first thing you have to do is build trust. Social validation goes a long way, especially in the crypto space; many of our interviewees stated that they would immediately trust a new fintech product if it were recommended by a friend, organization, or famous personality. Short of that, you have to convince users that you’re the real deal. One way to do that is being open about what’s going on under the hood. When we first started building Wallaroo, our initial instinct was to black-box the underlying lending market so users didn’t have to worry about the details. However, we quickly found that our attempts to simplify the product had the opposite effect. “I get that you offer high interest… but how does it really work?” Once we’d heard that enough times, we realized that our target users were hungry to dive deeper into crypto. We began sprinkling explanations of the underlying concepts throughout our onboarding process. For our target market, the ability to try using crypto safely is a value in itself.
The road ahead
On September 4th, we launched to a small group of private beta users. Though we’re excited by this milestone, the journey to equal economic opportunity has only just begun. Though we’d like to make Wallaroo available to a wider audience, we’re currently facing the same obstacle as the entire DeFi ecosystem: unprecedented gas fees. $20 just to make a deposit is not a great sell, even in exchange for 10% interest.
To that end, we’ve spent the past several weeks investigating the following improvements:
- Lower fees: There are a number of products competing to be the community’s go-to solution to the fee problem. These include Layer 1 blockchains, which aim to supplement or replace Ethereum with the promise of faster, cheaper transactions. Another option is Layer 2 solutions, which process transactions in batches and roll them up into a single transaction to record on the Ethereum blockchain. There’s no clear winner yet, but we’re considering rebuilding Wallaroo on Solana, an up-and-coming blockchain that promises block times of 400ms and transaction fees of a fraction of a cent.
- Maximize rates: yearn.finance, a protocol that maximizes yield by automatically switching between different lending providers, is the latest darling of the DeFi community. Yearn’s strategies are more aggressive (and therefore more risky) than is appropriate for Wallaroo, but a similar approach could allow us to maximize the interest rates we offer to users.
- Simplify the UX: Based on feedback from our users that variable rates are a new and potentially unsettling concept, one way to improve the experience would be to provide more accurate projections for the interest earned over time or change the business model to offer stable rates. We could also consider implementing gasless sends using the new USDC 2.0 contract, which would allow users to make their deposit without any need for exposure to volatile cryptocurrencies.
Have we piqued your curiosity? Learn more about Wallaroo and sign up for the waiting list at wallaroo.finance. And for more of the nitty-gritty details on how it all works, hop on over to our FAQs.
Special thanks go to:
- Maria Alegre and Patrick Lu, our Mozilla mentors, for their guidance and encouragement throughout the MVP Lab Program
- Raynold Sim and Daniel Que for providing informal security audits of our smart contract
- All of our private beta users for their enthusiasm, patience, and time spent talking to us
