Pausing New Orders on Nuo.Network

Published in

Nuo Network

6 min readJul 31, 2020

We started our journey in the Ethereum ecosystem in May 2018 with an aim to build a decentralized lending and borrowing platform. The term DeFi didn’t exist back then. We had no idea how big DeFi would become. Today our announcement would be incomplete without addressing WHY we started this journey, acknowledging the support of the entire Nuo and Ethereum community, and lastly explaining how we reached the decision to pause new orders on Nuo.Network.

The Freedom to Build a Global Product

Having gone through the experience of working with banking partners in India, the only thing our team was looking for at the time was the freedom to build financial applications without the dependency on incumbent financial institutions or banks. In this thirst for the freedom to build financial applications, we were drawn towards Ethereum in 2018 when the crypto craze had already died down and ETH price had hit rock bottom.

In our view, the freedom to build decentralized financial applications that are accessible globally is the single biggest contribution of Ethereum towards building a permissionless new-age financial system. The Ethereum community welcomed our team from India with open arms and within the first few months of our public launch in early 2019, we (along with our friends at Maker, Compound, Dharma, Instadapp, and few others) became synonymous with this nascent DeFi ecosystem being built on Ethereum. Within 6 months, we were the #1 DeFi protocol from Asia and #5 in the world in TVL (Total Value Locked) with USD 20M in deposits and USD 15M in crypto-backed loans.

Making DeFi Accessible to everyone

Since the very beginning, our goal was to make crypto and DeFi accessible to everyone. Back then, we decided to push the boundaries of what was possible in DeFi by being the first and only platform to introduce contract wallets and meta transactions. In this process, we introduced many new users to the world of DeFi without the trouble of using Metamask and by making gasless transactions possible. This gave us the support and user love from a global community of passionate early adopters who were experiencing web3 and DeFi for the very first time. While these were completely new concepts back then, today it’s heartening to see most platforms moving in this direction.

Mistakes and Learnings

There were also mistakes and new learnings along the way. The way we built the liquidation mechanism using partner exchanges restricted us from increasing the order sizes which hindered our growth beyond a certain point. Although we were quite successful in attracting new retail customers from Asia, it wasn’t a needle mover in increasing TVL (Total Value Locked) metric which has now become the de facto trust barometer for users and the community. Our transition to the next version of the platform wasn’t fast enough as the team was always preoccupied with improving or fixing the existing version.

The Evolution of DeFi

From the time we began our journey 2 years ago, DeFi has evolved significantly. In 2017, the buzz was around building a decentralized protocol with a native token, while hoping the relayers building on top of the protocol would figure out a way to attract consumers and achieve product-market fit. This approach failed to gain any significant traction from consumers due to misaligned incentives. However, this period saw a massive price action followed by a steep decline in token prices building financial primitives on Ethereum. What worked for Ethereum and DeFi was progressive decentralization which pushed teams to create financial dApps for consumers and first prove product-market fit. This product-market fit and initial traction attracted new developers to build on top of the core protocols used by these dApps. We clearly missed this trend of opening up to a new developer ecosystem that was drawn towards building on Ethereum.

In 2020, DeFi has come full circle and the promise of fully decentralized protocols is at the forefront again. We have seen new DeFi tokens being launched along with liquidity mining incentives (that can run up to 4 years) which will most likely create an artificial ‘backstop’ for traction and liquidity. This has attracted billions of dollars towards DeFi from institutions and crypto whales to ‘farm’ these incentives. This has also tested the boundaries of the Ethereum network which is no longer usable for an average retail consumer trying to place a $100 trade.

Both these current trends in the Ethereum ecosystem — 1) Liquidity mining incentives by DeFi protocols and as a consequence 2) High gas fees to serve high-value transactions by institutions and crypto whales; make this version of our platform unsustainable in the long term. This is also fundamentally misaligned with our broader vision of making DeFi accessible to everyone.

We are still bullish on Ethereum and DeFi and are excited about the possibility of ETH 2.0 and layer 2 solutions scaling DeFi applications to reach millions of retail consumers. But with significant delays in ETH 2.0 launch and with layer 2 still in its nascent stage, as a team, we think we need to refocus our energy on other important problems and opportunities we see in our home market.

The Next Billion

India is home to 1.3 Billion people. It is the world’s largest democracy with a free and open market and is likely to become the 3rd largest economy in the next decade. Thanks to Reliance Jio, over 400 million people now have access to high-speed internet connection and smartphones.

India has had its own share of ups and downs with crypto. At its peak in 2017, Indian exchanges were doing USD 250M in daily volume with 5M in estimated active users at the time. Post the central bank’s circular which cut off Indian exchanges from the banking infrastructure of the country these numbers hit rock bottom. Today, estimates suggest that less than a million users (in a country of 1.3 Billion people) actively hold or trade crypto and daily volumes are abysmally low. India is now the only bastion left with extremely low crypto penetration, among the top economies in the world. All this is likely to change as India’s highest court recently held that the central bank circular which placed a banking ban on the crypto industry is unconstitutional.

There is now a massive trust deficit that needs to be filled to attract the next billion users to crypto and DeFi. We have set out to solve this core problem and create the simplest way for Indian consumers to invest in crypto assets, starting with Bitcoin which currently has the highest mind share in India. Read more about our approach here.