Designing for composability in crypto

Designing for a good developer experience is proving to be more successful

This was originally published in NFTY on Substack

NFTY tracks the ever-evolving narrative of how mainstream will enter crypto through user-facing applications. In each edition I explore dApps, games, and the ecosystem affecting consumer crypto applications.

I’ve been having the summer slowdown and haven’t been publishing each week. I hope to get back into the swing of things from here.

Many of the most popular decentralized applications today are products built for developers rather than users. The applications that design for users tend to struggle to attract users and undermine decentralization in order to create a better user experience. But even with the user experience improvements, the products built for developers have a higher total amount of volume passing through the contracts over user-facing dApps.

This is because third-party developers are creating the features & content for applications with composability. In the same way that Minecraft & Roblox became successful from user-generated content and third-party creators, so will many of the most popular decentralized applications today. Dapps that are built as closed ecosystems will have a difficult time finding product-market fit with the increasing amount of substitution products that exist with a similar value proposition.

The puzzle analogy

Everyone in the DeFi community likes to use legos as the metaphor for composability. I see composability more as a puzzle. Pieces can be designed in multiple ways:

1. One connecting side only (usually user-facing and not developer-facing, like Dharma)
2. Two or three connecting sides (usually a middleware protocol like Compound, Uniswap, or 0x)
3. Infinite edges (Coinbase Earn, InstaDapp, Coinmine)

If more dApps are built with composability & open ecosystems in mind, we’d start to build a larger puzzle with more possible edges. When puzzle pieces are latched onto existing pieces, they are deemed more innovative but with less upfront work to build.

We’re currently in the stage of trying to create these one-sided puzzle pieces (What can we build on top of Compound? What can we build on top of Uniswap? What can we build on top of Cheeze Wizards?) We must start looking outside the box to build even larger puzzle pieces.

Developer-focused applications and plug-and-play models have been most successful so far. Here’s a dive into the five products that I think are doing the best work on this front.

1) Compound — the building block for developers

Compound is designed as a puzzle piece with four edges, allowing developers to plug into it in multiple ways. This gave rise to products like PoolTogether, a no-loss lottery. Since launching V2, Compound has seen more growth than any other middleware protocol, with seven different projects using Compound’s contracts to allow users to earn interest by supplying their digital assets.

Compound’s interest could also be a fascinating way to pay for gas in the future (supply DAI in a smart contract wallet and get x free transactions per month based upon how much borrow power you have).

2) CoinMine — plug into any protocol and deploy funds anywhere with low-risk

I talk about Coinmine a lot on this blog — but there’s something magical about being able to earn without any risk and then being able to deploy in contracts and potentially earn more. Coinmine sets itself up as a way for any user to enter risky contracts with low perceived financial risk because the money already being made is peanuts. Coinmine users can instantly turn their mined ETH into DAI and supply it on Compound to earn more interest.

If Coinmine integrated PoolTogether, Coinmine users can basically mine for lottery tickets. The way the app is designed is for the end-game — for any content to be created and for users to take advantage.

3) InstaDapp — plug into any contract and design features around market conditions

InstaDapp isn’t really much of a dApp — it’s more of a portal interface. The interface is designed in a way that allows InstaDapp to plug into other contracts rather seamlessly. Since creating the bridge between MakerDAO and Compound, the total amount of ETH has grown quite substantially.

There are a handful of mobile wallets trying to design for decentralized finance interactions (Zerion, Rainbow, Ambo) but if you look closely enough, InstaDapp already has a clear advantage by 1) not focusing on wallet infrastructure and 2) not having to deal with Apple. The focus on being a portal gives the team more flexibility and freedom rather than giving users basic wallet functionalities. A long-term path for InstaDapp is to recommend what contracts the user should interact with based upon fluctuating volatility in price or APR rates.

4) Cheeze Wizards — developers have a sustainable way to build on top of core experiences

Cheeze Wizards is a tournament game run entirely run on-chain, exposing itself to many great benefits including the ability for developers to build features around the game. Developers can spin up their own tournaments using the tournament smart contract and receive a portion of the amount raised.

As more experiences are built on Cheeze Wizards, the easier it would to deploy a tournament and start getting users to contribute — this is a benefit of being on-chain as opposed to using a second-layer scaling solution.

5) Coinbase Earn — distribute & deploy to millions

Coinbase Earn is designed for the end-game. Jacob Horne wrote last year that we are entering the utility stage of crypto, a step up from the speculating stage. Coinbase Earn has found product-market fit for the utility stage:

Similarly to how Coinbase was part of every go-to-market plan for ICOs, Coinbase Earn will be part of many dApps/smart contracts in order to achieve critical mass.

The one part that’s missing for me is how these dApps will incentivize the users of Coinbase Earn without a token of their own. It worked well with MakerDAO because of the design of DAI. I guess this is a problem for Coinbase to solve in the future as they hope to court more tokens with utility.

Disclaimer: I work on helping create a world of infinite possibility at Dapper Labs. All opinions are my own and don’t represent the opinions of Dapper Labs.