After two digitals of months shipping Shorter Finance, Marc can still vividly recall his first AAVE inner meeting. He sat beside Stani, one of the founders who exuded energy and determination. The room was sparsely populated with only a few members, and the summer sunshine shone through the window, creating a sense that DeFi was about to be created by the team. At that moment, AAVE was bearing the formerly name — ETHLend.
Marc’s involvement in this lending protocol inspired him to spot the users’ actual demands. DeFi is inevitably turning out to be an essential part of this industry, and the entire team went all in on the rapid growth of AAVE, ensuring its dominance on the DeFi list unshakable. Marc smelled some brewing unstable flavors, which awakened his pursuit of perfecting a 100% on-chain DeFi project.
During the daily usage of AAVE, the users couldn’t spare themselves from running into some issues in nature, occasionally a few tokens with low liquidity being counted into the pool of eligible assets to lend out, and there’s already a common sense for the crews to learn lessons from the collapsing DeFi projects.
As to liquidity universality, AAVE underperforms in this aspect. The router for dual-way-providing is blocked, as the liquidity provided by an average liquidity provider cannot bootstrap Curve if it has already been provided on AAVE. However, it is possible to offer liquidity to Curve and AAVE simultaneously. Straightforwardly, Curve breached the staking proofs’ liquidity restriction in AAVE and Compound. AAVE cannot be considered a truly 100% infrastructure running on-chain since price feeding and interest quotation rely on external data sources. In terms of some newcomers, such as CLever, their liquidation mechanism has somewhat surpassed AAVE.
In Feb 2022, a whale borrowed 30M CRV in three bundles on AAVE. His super huge position size caused the result of liquidation latency, totally breaching the safe line drawn in a centralized way. This saga directly exposed AAVE to a fatal failure — a sum of $1.6 million valued in bad debt, which was industry-wide regarded as an appetizer of AAVE’s deteriorating.
Though the team is considerate to each member and obtains high cohesion, as a developer who is the type of over-rigorous with potential flaws, Marc opted to leave AAVE to go for the self-propelled protocol that can ride on the next decentralized finance tide.
Marc met the fated partner Brady, an assertive buddy with a backdrop working in the broker department of investment banks for years, in his current hacker bay — IPI Labs. Being a senior player in DeFi, Brady pointed out that a significant part of the fundamental demands classified from the actions on AAVE is for token loaning and consequent sell-shorting moves. During the brainstorms with Brady, Marc found a 100% DeFi infrastructure can offer a “black box” issue solution, which all the diligent brokers have been seeking for a century.
In a typical scenario of stock loaning through a brokerage, individual stockholders lend their stocks (for example, TSLA) to the broker at a yield of 3%. The broker then gathers the stocks in small amounts to lend them to traders who want to short the stock in a batch. The trader sets up a short position at a rationalized price, which includes the cost of funding interest at 6%. The stocks become a debt to the broker from the first day the stockholders lend them out, and the broker is obligated to pay the yield. However, the prescribed yield will decrease if there aren’t enough traders borrowing the stocks and the broker’s income cannot meet the break-even point. The entire process involves two subprocesses that occur within a “black box.” Even if the yield decreases according to the agreements, the stockholders may doubt the broker’s loyalty, potentially leading to lawsuits.
What has been rooted in Brady’s mind for years drives these two guys to find out a solution — inadequate-collateral loaning, leveraged fund efficiency, and transparent position management. Marc and the tech crews completed the first demo of Shorter Finance, a 100% on-chain auto-broker protocol, in late 2021 and released the official online version in June 2022. For now, this innovative protocol has obtained over 14K active wallets from 10 countries and even received positive feedback from Nigerian crypto users.
A series of listing and co-marketing with viral projects led Marc’s work to grab headlines recently. It’s no secret that the native governance token of Shorter Finance has been achieved 10 times since the mainnet launch, according to the price displayed on Coinbase. The industry hasn’t witnessed competitors like Shorter Finance, which can run all the leveraged token loaning logics with inadequate collateral in a 100% decentralized way. Marc claimed he’s started seeing Shorter Finance invading the cognition of this industry’s derivative players very soon at Austin, Consensus 2023.