AllianceBlock’s Interoperable Suite of DeFi Tools Helps Projects Accelerate Their Vision
AllianceBlock’s interoperable suite of DeFi solutions work together to free up time and resources for founders, allowing them to focus on growing their core business
In 2018, AllianceBlock shared the vision of developing a decentralized, participatory platform that would allow founders to raise capital and engage with a large global community. This vision was born out of watching the 2017 crypto boom play out and seeing an opportunity to improve on the emerging difficulties and problems in the space.
When development began on what ultimately led to Fundrs, and with the DeFi sector still beginning to flourish, we encountered stumbling blocks that we have to develop our own solutions for. As we connected with more founders and startups, we realized this is a similar experience for many in the space. Launching a token is one thing, but maintaining liquidity and stability creates new challenges for founders and their communities.
Issues like low liquidity on exchanges and high volatility make it riskier for users to participate and can act as blockers to the broader adoption of DeFi. As we developed specific solutions, we also introduced them as services that other builders can take advantage of to help reduce risk, promote participation, stabilize liquidity, and foster user adoption.
Today, AllianceBlock offers an interoperable suite of tools that work together to provide an end-to-end solution for effective token management. In this article, we’ll take the point of view of Alice, a hypothetical founder with a great business idea for a blockchain dApp, and demonstrate how our solutions can assist her startup’s journey.
A participatory funding platform with Fundrs
The first challenge facing any startup is raising capital for their business. Many dApp developers choose to launch an initial DEX offering (IDO), but this still entails substantial effort to cultivate an audience that wants to engage with the project and acquire the token. Most token launchpads highlight their existing user bases to make it attractive for startups to launch on their platform. In reality, however, this doesn’t always work out for the best.
Many participants in token launches simply seek to take advantage of early-bird discounts and benefit from undue speculation. This diverts attention away from studying the business fundamentals of the startup and promoting sustainability for the long term. Web3 emphasizes the power of community with founders and their supporters to collaborate to ensure the startup's continued success. Founders often need to build a genuine community of supporters before their token launch happens to ensure their token is held by people who are aligned with them in their vision.
This often leads to a chicken-and-egg scenario for startups, where they need to raise capital to get started, and on the other hand, they need to get started and have some visibility to raise capital. Ultimately this means that unless startups can initially begin their marketing and build their communities, the interests of existing user bases of launchpad platforms and founders seeking to raise capital may not be aligned.
AllianceBlock believes that for the blockchain industry to sustainably move forward, there must be adequate incentivization and cultivation of a community of startups with good business fundamentals, alongside a base of supporters that can provide more than capital but also expertise and guidance.
Fundrs is built and designed to provide a decentralized capital-raising platform that promotes sustainability and collaborative participation between Seeker startups and Funders. It provides an ideal entry point for founders, allowing their ideas and fundamentals to be validated and vetted by a decentralized, global community of engaged supporters. Funders participate in capital-raising rounds based on their reputation, represented by rALBT so that founders can build a community of participants acting for the ecosystem's good and all startups launching their tokens on the platform.
Seeker founders benefit from more than just capital — to build reputation, Funders are encouraged to contribute their expertise and insights, meaning founders can tap into a potentially limitless resource of knowledge and skills.
This means that Alice can take advantage of Fundrs to raise capital for her blockchain project and connect with engaged Funders that will let her cultivate a solid community of early supporters. She can build her startup in collaboration with her community, who are empowered to ensure her business grows and succeeds sustainably.
Adopting a multi-chain approach with the Bridge
Another consideration for Alice is deciding on which network she wants her startup to issue its token to. Ethereum (ETH), with its scale and wide adoption, is the most popular and has the largest ecosystem of dApps and users. Since then, numerous L1 and L2 networks have launched, utilizing Ethereum for finality or providing an alternative to the network.
However, as Ethereum grew and with multiple dApps already on the platform, users are finding that the gas (transaction) fees have risen, and transaction times have become longer. Alternatives to the network have become preferable for startups, such as Avalanche, which has lower gas fees, faster transaction times and a large community with strong liquidity.
With more networks available, more startups launch on more than one network, taking advantage of the specific benefits each L1 can provide while enabling more users to access the token. Adopting a multiple-chain approach expands their token's utility and allows them to access liquidity from more providers.
Supporting more networks, however, effectively doubles or triples the work involved in managing the token. With AllianceBlock’s infrastructure suite supporting multiple blockchain networks natively, founders can manage their tokens and liquidity across different chains using one dashboard and take. And with the AllianceBlock Bridge, founders can enable their users to bridge their ERC-20 tokens and ERC-721 NFTs across the networks their startup supports, giving their tokens cross-chain utility and liquidity.
If Alice chooses to launch on one or multiple networks, managing her capital-raising rounds and launching on networks is streamlined and seamless. This allows her to think more about her business and determine which networks will best suit her and her users, decreasing costs and letting her deploy more quickly.
Sustainable token management with the DeFi Terminal and the DEX
The real work for Alice begins once the capital raise is over and the token is circulating. The next steps for her typically involve listing their token on DEXes on the networks where they’ve launched the token, encouraging more users to provide liquidity and holding the startup’s tokens. A well-designed token economic model includes campaigns that incentivize liquidity providers to keep their positions in liquidity pools and for token holders to keep their tokens. These can be accomplished through liquidity mining and staking campaigns.
Decentralized exchanges, or DEXes, work by facilitating the trading of a startup’s tokens through automated market makers (AMMs). Over a hundred DEX projects have since launched, mostly via forking open-source AMM codebases and building their own UI and features on top of them. As such, most of them utilize the same AMM at their core, and features designed to mitigate issues like impermanent loss for liquidity providers have to be developed independently. Moreover, these DExes are not interoperable and require managing multiple platforms for multiple networks.
Current AMM algorithms lack impermanent loss mitigation, and limited multiple network support for DEXes makes it difficult for Alice to manage her token’s liquidity. Managing multiple platforms leads to fragmentation in liquidity and a poor user experience, managing multiple dApps to maintain an overview of their pools and campaigns. This overview is important because liquidity and volume are critical metrics to keep an eye on, especially to incentivize token holders to HODL their tokens.
With the AllianceBlock DEX, founders like Alice can set up liquidity pools on our supported networks through a single platform. This allows founders to take advantage of multi-chain approaches while keeping a birds’ eye view of their token liquidity. The DEX is powered by a custom AMM developed in-house and designed to mitigate impermanent loss, making it more attractive for token holders to provide liquidity. And with the upcoming support of the Single-Sided Liquidity Provisioning Protocol, token holders and users can supply a single token to provide liquidity for a pool, with our algorithm automatically matching it with tokens provided by other users.
In addition, with the AllianceBlock DeFi Terminal, founders can deploy liquidity mining or staking campaigns across our supported networks quickly and easily. Liquidity mining allows token holders to receive additional rewards for providing liquidity to pools and transaction fees from the liquidity pool. Staking allows token holders to keep their tokens locked and receive additional rewards. These campaigns, in addition to the mitigation of impermanent loss through the DEX, benefit founders by providing an attractive incentive for their community to keep their tokens while managing the stability of liquidity on the networks they’ve supported.
With the DEX and DeFi Terminal, Alice can manage her liquidity across multiple networks and launch campaigns to incentivize her startup’s users. These provide her with an interoperable set of tools that look and feel the same, making it easier for her to manage liquidity sustainably and easily.
Optional compliance
In this changing landscape, Alice has to also think about being able to comply with regulatory requirements and offer compliant solutions. And she has to think about this on two levels — first, about her liquidity and getting access to more liquidity providers, and second, making sure that her startup fulfills the requirements to operate in the jurisdictions she serves.
While not focused on much in the first wave of blockchain protocols and DeFi solutions, compliance and regulation have increasingly become important considerations in many jurisdictions today. A key compliance component is Know-Your-Customer (KYC) checks to enable platform owners to verify their users. Custodial solutions have been built to address the need for compliance, requiring users to undergo KYC checks upon signing up.
Because these platforms tend to be centralized by nature, users would often have to sign up on multiple platforms to access more opportunities. For founders, this means managing their liquidity on multiple platforms and fulfilling compliance requirements.
Moreover, signing up on multiple platforms requiring KYC means founders and users have to submit their information again and again for each platform. For privacy-conscious users, this introduces private information and data management concerns.
AllianceBlock believes that decentralized, interoperable, optional and flexible compliance and regulatory solutions are important pieces to develop in embracing DeFi 2.0 and facilitating greater adoption. This is important as traditional capital provision needs compliance to be able to participate in DeFi, while also at the same time remaining true to the principles of decentralization, privacy and transparency on the blockchain.
TIDV (Trustless IDentity Verification) is an on-chain decentralized identity verification tool that can be integrated into dApps to facilitate KYC checks. TIDV is built with privacy in mind by utilizing zero-knowledge proofs (ZKPs) to verify the identity requirements of wallet holders without sharing sensitive information. For startups and developers, with TIDV integration, they can offer optionally-compliant solutions. Users only have to go through KYC once and use that information across different integrated dApps and be able to revoke permissions when needed.
This means that through AllianceBlock solutions integrated with TIDV, Alice can launch compliant capital-raising rounds on Fundrs and create permissionless and permissioned liquidity pools and campaigns on the DEX and DeFi Terminal. She has the option to manage liquidity providers from the general crypto space through permissionless solutions and attract institutional capital through fully-permissioned and compliant campaigns.
In addition, Alice can integrate TIDV into her startup’s solutions for compliance requirements. This integration allows her to develop compliant solutions while offering her users a choice from permissionless to fully-permissioned solutions. TIDV also gives users control of their private information, allowing them to share only what is required and revoke permissions when needed.
A growing ecosystem
Alice’s journey in this article is just a sample of different paths about how founders can take advantage of AllianceBlock’s interoperable infrastructure suite in their startup journey. We have tackled existing and soon-to-be-released solutions, but there is more in the pipeline to help founders at multiple steps in their startup’s lifecycle.
Still in development, Data Tunnel will allow founders access to a wealth of data to model complex scenarios and research new business opportunities. The upcoming Single-Sided Liquidity Provisioning Protocol will make liquidity providing easier for users across our solutions, and the SDK release will enable integration across AMMs and DEXes. With the Cross-Messaging Protocol, the Bridge SDK will allow developers to transmit arbitrary data between networks, unlocking multi-chain use cases and protocol interactions within their dApps.
With increasing integration between our own solutions, founders can easily manage their tokens, their liquidity, their campaigns, their capital-raising, their data management, and their multi-chain integrations, all within an ecosystem that offers consistent UI and user experience, secure and decentralized. AllianceBlock’s end-to-end blockchain ecosystem is truly becoming a one-stop-shop solution for founders’ DeFi, data, and compliance infrastructure needs.
If you’re interested in seeing how AllianceBlock could support your project, contact our Business Development team here.
About AllianceBlock
AllianceBlock is building seamless gateways between TradFi and DeFi by remedying issues in both spheres and linking them more closely. They see the future of finance as an integrated system in which the best of both worlds can work together to increase capital flows and technological innovation.
They are building this future by bridging traditional finance with compliant, data-driven access to new decentralized markets, DeFi projects and ecosystem-scaling tools such as funding and interoperability. As such, they are building a next-generation financial infrastructure that aims to provide regulated financial entities worldwide with the tools they need to access the DeFi space seamlessly.
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