DeFi Dollar Cost Averaging in Solana
- Dollar-cost averaging (DCA) is awesome for everyone
- There are many challenges to implementing DCA on DeFi web3 apps
- Mean Protocol fixed this issue with the help of our friends from Solana 🔥
Intro to DCA
When people first dip their toes into crypto they usually have two main concerns: How do I buy it, and how do I hold it. These two are answered almost perfectly by centralized exchanges like Coinbase or Binance with their Dollar Cost Average (DCA) feature for retail investors.
Essentially, DCA allows users to buy a little bit of their favorite crypto every day/week/month stress-free and automatically.
DCA is awesome for investors
Investors love DCA because
- Is simple: you don’t need a Ph.D. in finance to understand what’s happening with Dollar-cost averaging.
- It’s powerful: DCA favors consistency over TA and fundamentals and still manages to beat timing the market 82% of the time.
- It’s convenient: investors can take a hands-off approach because trades happen automatically on a controlled interval.
Here’s a slide from Binance Academy that illustrates the use case for DCA:
DCA is awesome for app developers
When an app developer (like Coinbase or [insert-your-dapp-name-here]) offer DCA to their users, they are guaranteeing a couple of things:
- Happy users (see above)
- Increased revenues → having the authorization of users to execute trades on their behalf using their funds means more transactions → more fees → more revenue.
- Increased TVL → those new tokens you are buying on behalf of your users stay in your App/CEX/DEX/Protocol, meaning you are essentially enabling future usage of your product.
DCA’ing is one of the stickiest features any exchange or investment platform can provide for their investors because it keeps them executing transactions automatically. Users configure it once and let it run until they decide to change their strategy.
But… DCA 💔 DeFi (?!)
So, if DCA is almost “perfectly” implemented by most central exchanges, why do we need anything else? Well, there is a HUGE cost associated with centralized exchanges, in terms of privacy, control, risks of centralization associated with hacking, lack of access to your funds, etc. As the saying goes:
“Not your keys, not your crypto”
But DeFi apps with integrated decentralized DCA strategies are not a common occurrence, and retail investors coming from TradFi or centralized crypto exchanges are left wondering how is this new and exciting world of DeFi missing one of the simplest of things loved by all.
Three reasons why DCA is not a common feature across web3 apps in DeFi:
- Measuring time accurately in blockchains is really hard
- Triggering time-sensitive decentralized callbacks to on-chain smart contracts is really hard to do, and
- Predicting network congestion and network fees on future operations is near impossible (🤕 Ethereum 👀)
We did all three on MeanFi and our DCA is amazing!
One of the big benefits of building Mean Protocol on Solana is that time is measured a lot easier and accurately thanks to Proof of History and leader node selection. So, there goes #1 ✅. Solana also makes it possible to ease #3 since it charges a flat 5k lamports network fee for transactions (at least for the time being), removing completely the need to estimate network fees based on congestion for future operations… okay ✅.
So we only had to focus on #2, and DAMN BOI HE THICC 🔥 we delivered 😍
Here’s how it works
Getting started with your first DCA is easy on MeanFi
- 1) Head over to https://app.MeanFi.com and connect your wallet
- 2) Go to Exchange → Recurring
- 3) Enter your desired frequency and token to buy
- 4) Select how much you want to pre-fund (you can always come back to add more later), and read the “How does it work?” section.
- 5) Click “Deposit” and then “Start”, sit back and watch your money stash grow!
You can have as many repeating buys as you want, on as many tokens as you want, with as many different timings and strategies as you want. All in a fully decentralized, censorship-resistant, self-custody, trustless, and permissionless DeFi glory! 💌
Go, go, go! Take it for a spin! → https://app.meanfi.com/exchange
We are super excited to bring Mean DCA to everyday banking on DeFi, and have big plans to bring it to other apps in the Solana ecosystem. If you are an app developer interested in bringing Decentralized DCA to your app using Mean Protocol, hit us up on Twitter, and let’s talk!