Flux x Token Terminal: Interview with Peter Mitchell
In this blog series we interview founders in the crypto space to learn more about what’s going on with their projects.
We sat down with Peter Mitchell, CEO of Flux. Flux’s goal is to build a scalable and decentralized protocol for financial markets. Flux is being developed on the NEAR blockchain.
What is Flux?
Flux is a highly scalable open market protocol enabling markets on any asset or event in seconds.
Who is the team behind Flux?
We are a small driven team consisting of Jasper de Gooijer (CTO), Wesley Graham (engineering), and myself as CEO.
Why did you decide to build a protocol for financial markets?
We think prediction markets are the killer use case of blockchain. We want to be the “Stripe for markets,” providing any developer with the power to democratize access to a diverse range of markets in a trustless, decentralized way — all in three lines of code.
What are the major value adds of decentralized markets compared to centralized counterparts?
To relate Flux to Web 2.0 — NEAR Protocol is similar to the Internet protocol, Flux is like SMTP, and apps building on Flux are like Gmail and Yahoo.
We want to provide the plumbing for markets on any asset or event. By providing this plumbing, we connect users from all over the world with global liquidity while taking away friction points caused by traditional money processing services.
We use the terminology “open market protocol” to break free of the common associations held when discussing prediction markets. We don’t particularly like the term “prediction market” because every market can provide predictive power, take the public stock market as an example.
With this in mind, we chose to descope and use a term that encompasses a wide range of future verticals.
Flux started off providing startup related derivatives on Augur. Can you expand on what you built and key lessons from the experience?
When Jasper and I transitioned from EveryDapp.com, we dove headfirst into DeFi. We fell in love with the idea of financial legos (the ability to connect existing DeFi to create something new). From there, we looked to existing protocols to build the “Robinhood for Startups.”
We quickly discovered Augur’s on-chain order book was too slow and expensive, so we by-passed Augur’s order book and designed our matching engine on 0x Protocol and implemented DAI. The primary point that required innovation was the resolution time, which on Augur V1 is seven to sixty days, which is unfathomable for users compared to traditional markets.
We realized that these were patch solutions, and a sustainable business model wouldn’t emerge on this tech stack at this time. With this experience, we were able to identify missing elements that would bring these markets to the mainstream.
Why did you decide to pivot and build your own protocol on NEAR? What other options did you consider?
Our new matching system, enabling DAI and redesigned order book, stepped in the right direction. Still, we were disappointed with the speed of the Forecast Foundation releasing Augur V2, which was announced in summer 2019, and the uncertainty around ETH2.0.
These execution risks prompted us to take our learnings and create Flux. We did extensive research into the next-generation Layer 1s and initially examined Polkadot, Cosmos, and Solana. Eventually, we landed on NEAR because of their dedication as a team to build a sustainable ecosystem — in combination with their background building distributed systems at scale.
How closely are you working with the NEAR team?
We are proud to be one of the first teams accepted into the NEAR Beta Program, which proved invaluable as a way to quickly iterate on our protocol and offering to users and developers. We are pioneering their new initiative, the Open Web Collective, which provides incubation and acceleration to promising teams building the future of Web3.
What are some interesting design choices you made building the Flux protocol?
We designed a tiered data-driven oracle that builds off of NEAR’s random number generator. In this oracle, validators stake Flux Token into a pool each EPOCH. Using NEAR’s randomness beacon, we assign a subset of validators to resolve markets within that EPOCH. Validator fees are a function of open interest and distributed to all validators that staked for service in that EPOCH.
We built off of the Forecast Foundation’s dispute mechanism and employed the same type of dispute escalation mechanism. This oracle design allows us to have a minimum resolution time of 30 minutes and a maximum resolution time of 24 hours with finality.
In addition to resolving markets, we are also experimenting with implementing passive interest distribution for Flux Token. All open interest in markets on Flux is denominated in DAI. This DAI can automatically be swapped into cDAI or Maker CDPs to garner APR. This APR can then be claimed each EPOCH by Flux Token holders based on total ownership.
What are the biggest challenges in building a protocol for decentralized markets?
There are many edge cases to consider when thinking through the oracle and what type of data and markets you would like to support.
Our highest priority is to create a thriving sustainable ecosystem, in which the token has a real-world use case that encourages individual participation in the protocol — along with more sophisticated purpose-built businesses.
Flux is placing an emphasis on third-party developer experience. Why is that and what tools you are building?
Our vision is to create a suite of tools that gives any developer the ability to launch markets with as little friction as possible.
We provide a very simple, yet powerful, SDK that offers access to all market mechanics and resolution services. Our frontend app is open-source on Github so that any developer can clone and tweak the UI to their preferences.
By removing the majority of friction points for teams, they can focus on their creative and novel ideas.
To tie this all together, we are developing tools for liquidity providers to market make efficiently and cost-effectively.
Who is building on Flux and what use cases are they tackling?
There are a handful of promising development teams that are in the early stages of development, working on challenges like “eToro for predictions”, decentralized insurance, and real estate synthetic tokens.
The first team that has publicly announced building on Flux is ARterra, an engagement platform designed for esports and traditional sports, where fans are rewarded and incentivized. One of their core offerings will be markets for esports and traditional sports, which I find exciting.
Will your development team be building their own UIs on top of the protocol?
We are happy to support development teams building on top in any way we can. Our focus will remain on the protocol level, and in building tools to help businesses developing on Flux be successful.
What markets do you expect to be most popular and why?
In the beginning, we think many use cases will be more gamified or relate to crypto. We expect there to be a significant push for esports markets, which is projected to be a $12.9 billion market in 2020.
This demand, in my opinion, will be higher because of the pressure from sports fans flocking to new mediums for entertainment during the coronavirus.
Our protocol has been used to forecast the growth of coronavirus cases, political front runners, and markets around startup milestones.
What are some less-known use cases for open market protocols you are excited about?
The most compelling use-case I’m excited about is what we’ve internally referred to as “Proof of Credibility” markets.
These would be on-chain predictions signed publicly by two or more counterparts. Once the market is live, users can trade and stake money on the outcomes. At the resolution date, the results of these markets would automatically be tweeted out to show which party was correct.
This concept would mix markets with eToro-style social forecasting. I think this would be an excellent way for industry leaders to publicly put their credibility on the line behind their forecasts.
Who are the users Flux is targeting and how do you view customer acquisition (especially of non-crypto users)?
We are focusing less on user acquisition in the future because there won’t be a specific Flux app for trading. However, we are doing a lot of user research. We are currently focusing on distribution channels like Twitter, Discord, Reddit, and also interviews like this to reach a wider audience.
When businesses build on our protocol, we can guide them to vibrant and tested distribution channels for user acquisition. This approach should help use-cases flourish faster.
What channels should users who are interested in Flux be following?
- Learn more about Flux https://flux.market.
- See updates on Flux Twitter.
- Chat in our Discord community.
- #FluxFriday updates to learn more about use cases.
- Github for developer resources.
Given the early stage in financial market protocols, how do you view competition and what differentiates winning teams?
We aren’t focusing on competitors at this stage. We view any companies working on financial market protocols to be a net positive for the space.
We are more focused on continuously shipping code and creating the best experience for our developers and users.
What is the product roadmap for the next 12 months? When do you expect to launch and what should users expect from Flux?
We recently launched the first version of the Flux App and Flux SDK. Our protocol is currently live on the NEAR testnet.
Over the next 12 months, we will be progressively decentralizing by first launching our market mechanics on NEAR mainnet, with the Flux oracle following shortly after.
From there, we will begin to focus more efforts on the SDK and market-making tools.
The big vision: how does the world look different in 5 years when Flux is successful?
Flux will provide the plumbing for markets on any asset or event. Each market and resolution is on-chain, which offers in-depth forecasting data across a diverse range of topics over time.
In the future, we hope to leverage this data and make Flux a fundamental part of propelling the world towards a more inclusive financial system with less data asymmetry.
You can find more information about Flux on their website https://flux.market/ and on their Twitter, Medium, and Discord.
