Sweep roadmap

Andy Singleton
Sweepr
Published in
6 min readDec 6, 2023

No startup roadmap survives contact with actual users. On the other hand, we have delivered our original plan for a decentralized bank. We will deliver big chunks of this growth roadmap.

Today the Sweep app reaches Arbitrum, Ethereum, BNB, Polygon, Optimism, Base, and Avalanche. Purchases flow into a simple but complete liquidity stack:

  • Liquid cash management with DAI DSR on Ethereum
  • Higher-yield DeFi with USD+ and more targeted strategies on several L2 chains
  • Scalable money market placement through a Maple pool on Base

Next steps

This article describes next steps on the road to becoming the savings bank for DeFi, and a systemically important financial institution overall.

  1. Distribution
  2. Yield aggregation
  3. Embedding and scaling
  4. Expand margins
  5. Solve hard problems

1) Distribution

Sweep gives DEX traders one coin to save, bridge, and swap.

The network is expanding

We can make user’s lives easier by improving distribution. We can make sure that SWEEP is available on the chains and DEXes where they want to save and swap. Bridging should be easy, fast, and reliable.

Some of what we are distributing to savers is MakerDAO’s DAI Savings Rate. Sweep is a BIG supporter of all of the other tokenized treasuries, RWAs, and yield bearing stablecoins. However, MakerDAO’s version currently has an advantage. That is why the DAI savings vault has $1.6B in assets, and the next biggest tokenized treasury provider has $160M. MakerDAO accumulated $5B of USDC in 2022, when users swapped from crypto into stablecoins. They can use that money to peg the rate at 5%, and provide deep liquidity. MakerDAO “Peg Stability Modules” still have $400M — enough to carry the cash drag for all of DeFi.

Sweep adds value for savers. MakerDAO can reduce the rate at any time by governance, and their governance is erratic. Sweep commits capital, due diligence, and monitoring to protect users from changes in governance and markets. Sweep will protect its users by reallocating into money markets that offer competitive yields.

2) Yield aggregation

Some blockchains have hot ecosystems, with token rewards that stack extra “APY” on top of the risk free rate. Sweep can make returns above the risk free rate by moving money into those ecosystems.

We’re already into the yield aggregation phase. Arbitrum is distributing 50M in “Short Term Incentive” (STIP) rewards. We are building our own asset “stabilizers” to earn some of these rewards. We are recruiting other borrowers and protocols that can provide delta-neutral yield. We will run similar campaigns to build TVL on the other blockchains that we support.

We’re shopping for $1.5M in rewards. This will allow us to boost yield on the first $100M of assets by 3% for six months. $100M in assets will make our partner blockchains the largest market for tokenized securities outside of Ethereum mainnet.

While we are a small startup, we can place money into high yield strategies without exhausting the source of yield.

As more money goes into any given pool, the yields decrease. Anything over about $100M will need to go into off-chain money markets. Off-chain placement improves security by placing assets with securities custodians, who almost never lose assets.

3) Embedding and scaling

The first $100M push will prove reliability and qualify Sweep for embedding. SWEEP will qualify as collateral for DeFi protocols, payments, and structuring. This is a scalable role. The eurodollar market uses about $4T in bank reserves and collateral.

Wallets and protocols that embed Sweep will get a competitive rate throughout the business cycle. Allocations will flow to the best source of low-risk yield from governments, commercial money markets, and DeFi.

4) Expand margins

The protocol will need higher margins in order to provide innovation and capital protection to users.

Stablecoin and payment services

Stablecoins that pay zero interest have a high margin.

The first release of Sweep offers the SWEEP savings coin, which is like a bank savings account. Users might also want something that is optimized for payments, like a checking account. We can strip off the interest, and use it to subsidize exchange at 1.0000 through a variety of banking networks.

That’s a direction for the CHECK stablecoin.

Sweep and Check, so happy together

Longer duration loans

A normal bank makes 200 to 300 bips (2 to 3 percent) return on assets. It earns this money by doing maturity transformation. It allows savers to ask for money back any time, while lending to borrowers for a year or more. This is difficult!

Sweep makes a smaller spread because it is providing a shorter maturity transformation. Sweep is lending money out for up to 7 days- the maximum time allocated to sell tokenized securities and respond to a “call” of money.

The next frontier is to lend money out with call delays of up to 60 days. 60 day money is more useful to borrowers and earns a higher rate.

Sweep has the tools to handle longer durations.

  • Sweep has a state of the art “liquidity stack” to draw upon when depositors want money back — assets that can repay in times ranging from 1 block, to 1 week.
  • Sweep stabilizers are ready to go. They can be configured with longer call delays. They can handle both crypto collateral, and off-chain collateral pledges. They can invest in other private credit pools, adding a tranche of borrower capital to reduce risk.

The core of a longer duration lending strategy is to match it with longer duration deposits — staked deposits that earn a portion of that higher rate.

5) Solve hard problems

If we want DeFi to become competitive with CeFi, we have to solve some hard problems.

Reduce losses

Currently, DeFi has a loss rate due to mistakes, hacks, and scams of about 3% per year. There is no way that DeFi can be competitive with CeFi until it brings this loss rate much lower. DeFi can probably afford about a 1% loss rate, paying for it with improved automation, access, and innovation. Regulators will want to see the loss rate near zero.

Losses are enabled by two features that are important for DeFi.

  1. Transactions are not reversible. This feature is essential for DeFi automation and value. You cannot “compose” services together if one part of the chain can be reversed and broken later.
  2. Participants can be anonymous. This improves access, and it has been important for the growth of DeFi. However, it increases the risk of loss due to mistakes, hacks, and scams.

We can imagine a form of DeFi where wallets are fully identified. Many mistakes could be reversed voluntarily, and hacks and scams would be squashed. The economic value of non-anonymous wallets might be considerably greater than the value privacy loss.

We will be allocating to entire blockchains where wallet owners are identified. They are moving toward a system where crypto assets have privacy, and they can drop into a DeFi system that is has less privacy, and better economics.

Unify a global DeFi-ready securities market

Currently, Sweep provides margin funding for tokenized securities that land in a fragmented market. Each new issue has a small number of whitelisted buyers, and few DeFi services that are allowed to handle it. We are working toward a unified market for “DeFi-ready securities.” It will have a shared buyer list, and it will use a wide variety of DeFi services.

The market is fragmented by regulators who apply many different national laws to a global market. Real banks have an “interbank” market that is more lightly regulated, wholesale, and global. The emerging DeFi-ready securities market will fill the same role. In today’s regulatory environment, buyers will be limited to non-US finance professionals. They have private market exemptions, and they can freely exchange the DeFi-ready issues. DeFi-ready securities apply transfer restrictions in the token, not the protocol. So, they can fit into pools and services from many or most DeFi protocols.

Participate

Join our Discord or follow us on Twitter to participate as a saver, asset provider, developer, wholesale borrower, or advisor.

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Andy Singleton
Sweepr

Software entrepreneur/engineer. Building DeFi banking at Maxos — https://maxos.finance . Previously started Assembla, PowerSteering Software, SNL Financial.