Introducing the NeatFi protocol

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NeatFi

5 min readDec 22, 2022

Challenges in DeFi protocols

There are many challenges to the existing open-source DeFi protocols, such as narrow scope of services, limited upgradeability, and abundance of clones. While many popular protocols, such as Uniswap, still do not generate protocol fees, others do, however their governance token holders do not often receive yields from those fees.

One of the key challenges with decentralized finance (DeFi) protocols is that they are not easily upgradeable, although some may consider upgradeability a con rather than a pro. Limited upgradeability leads to a situation when versioning the protocol means having the old version running in parallel to the new one.

DeFi protocols are also often cloned, which means that other developers can take the code from an existing protocol and use it to create a new, slightly modified version of the protocol. This can lead to issues if there is a bug in the original protocol, as the clones will also have that bug. Additionally, the original development team may not be responsible for the clones, which can lead to a lack of accountability.

A major challenge, however, is that DeFi protocols don’t offer integrations with other smart contracts. Rather, a protocol introduces an SDK for others to build consumer-facing dApps on it. That leads to the business model of the third party dApps to be limited to innovations in the consumer-facing app itself, rather than on the smart contract level.

Introducing the NeatFi protocol

NeatFi is a decentralized finance (DeFi) protocol that uses modular, smart contract-based architecture. The smart contracts that make up the protocol are upgradeable and compatible with the Ethereum Virtual Machine (EVM), allowing for flexibility and compatibility with other systems.

NeatFi is open-source, but there is no need to clone the protocol in order to build a product on it. Instead, third parties can use contract-to-contract integration to integrate with one or more of NeatFi’s modules and provide their own offerings to consumers. This allows for innovation at the smart contract level and promotes the growth of the DeFi ecosystem.

NeatFi aims to support a wide range of existing DeFi use cases, including marketplace use cases, such as token swapping, selling, and auctioning, liquidity provision, and asset management. In addition, NeatFi is also designed to support new, innovative DeFi use cases that may not yet have been discovered.

NeatFi is run by a DAO consisting of a team that has strong belief that the future of the financial world is in trustless decentralization. Since the protocol is open-source, everyone is welcome to build and collaborate on it! In fact, we are going to build our own consumer-facing apps on NeatFi, along with the community.

Modules

NeatFi V1 is now live on the Ethereum network and offers support for three marketplace modules: Asset Swap, Asset Sell, and Asset Auction. These modules enable users to swap, sell, and auction a variety of ERC token assets, including ERC-20, ERC-721, and ERC-1155 tokens. The auctioning module supports both ascending and descending auctions.

The marketplace modules also allow users to create orders that contain mixed token assets, enabling them to perform multiple operations in a single transaction. This can help to streamline the process of managing and trading assets on the blockchain.

Architecture

NeatFi is built on a modular architecture to ensure scalability of the protocol, as more modules are being added to the modules library.

All contracts of the protocol are upgradeable to ensure the scalability of the protocol to adapt to changing market conditions. This ensures that the protocol can continue to be useful and relevant even as the ecosystem evolves. Upgradeability is also important for addressing bugs and other issues that may arise, allowing the protocol to be continually improved and optimized.

The architecture of NeatFi can be divided into three main layers:

The Storage layer, which provides a unified storage space for the protocol. In V1, this layer is used to store all of the orders created using the marketplace modules.
The Protocol modules layer, which contains the various modules that make up the protocol. In V1, this layer consists of the Asset Swap, Asset Sell, and Asset Auction modules.
The Implementation or Actor layer, which contains third-party smart contracts that implement any of the protocol’s modules and interact with the protocol using their unique actor keys.

These three layers work together to provide a flexible, modular platform for DeFi applications. The architecture allows for the easy integration of new modules and the creation of new, innovative DeFi use cases.

Actor contracts

Smart contracts that integrate with the modules of the NeatFi protocol are called Actors. In order to start using the protocol’s modules, Actors must request an actor key, which is generated and granted on-chain after a review of the application. This actor key is tied to the address of the contract and is used to identify the Actor.

The way that NeatFi works with other smart contracts is similar to a web2 software-as-a-service (SaaS) platform that uses API keys to provide unique services to its customers.

NeatFi does not impose any limitations on Actors in terms of their business model or product offerings. Actors are free to choose their own business models, tokenomics, and other aspects of their operation, allowing them to innovate and offer unique services to their users both at the consumer-facing and smart contract levels.

Protocol fee distribution

NeatFi aims to build the world’s biggest decentralized autonomous organization of builders by driving the transition towards financial decentralization. Therefore, the protocol has a built-in fee distribution mechanism to the holders of the NEAT token.

While actors receive the majority of fees, the portion of the gross fees that goes to the protocol’s treasury is what is used to generate a protocol distribution fee. The majority of the received gross fees is distributed to the NEAT token holders that lock their tokens in the protocol treasury. Every 15 days, as long as those tokens stay locked, holders will be available to claim their share of the protocol distribution pool.

NEAT token

NeatFi DAO is governed by the NEAT token. The utilities of the token at the moment of its launch include:

Governance — using NEAT tokens as votes to govern the NeatFi protocol
Protocol fee yield distribution — NEAT tokens can be locked on the protocol treasury to ensure that the token holder is eligible to claim their share from the protocol fee distribution pool.