Cloned Assets on Solana: Evan Deutsch's Vision for a More Liquid DeFi Market

In the world of decentralized finance (DeFi), innovation and vision collide to forge new pathways toward financial democratization. Today, we're thrilled to spotlight a narrative that encapsulates this journey—a deep dive into the creation and evolution of Clone, a platform at the cutting edge of DeFi's future. We sit down with Evan Deutsch, also known as Mark, a visionary Core Contributor and Co-Inventor of Clone, for an exclusive installment of our "Behind the Startup" series.

The Genesis of Clone: How A Quest for DeFi Democratization Led to Innovation

Ishan Pandey: Hi Mark, great to have you here for our "Behind the Startup" series. Please tell us about your background and how it has prepared you for your journey as a Core Contributor and Co-Inventor of Clone.

Evan Deutsch AKA Mark: It's great to be here, Ishan! I met Ku, my fellow Co-Inventor and Core Contributor of Clone, during our college years, and we've been working together ever since. Our partnership started when Ku invited me to join a fintech venture he was pioneering. He had an innate talent for crafting beautiful front-end designs and a knack for high-level strategic planning, while I used my experience as a software engineer to bring our shared vision to life.

Our initial project was focused on easing the trading of international securities across geopolitical borders. However, as we delved deeper, we both realized that the traditional financial systems had their limitations, especially when it came to inclusivity and accessibility.

We recognized the DeFi space as the arena to actualize our goal of democratizing finance. Even more specifically, we saw the speed and efficiency of the Solana blockchain and wanted to play a role in the future of its DeFi ecosystem. We quickly pivoted our focus to building a protocol that could strengthen Solana DeFi. Through persistent refinement of our system architecture, our efforts have evolved into Clone: A platform optimized for non-native token trading on Solana.

Ishan Pandey: What inspired the creation of clAssets, and how do they contribute to the introduction of liquid markets for non-native assets on Solana?

Evan Deutsch AKA Mark: The inspiration behind cloned assets, or clAssets, stemmed from a problem our team noticed within Solana DeFi: A lack of liquidity for non-native assets. Non-native assets are tokens that come from a blockchain different from the one they are being traded on.

Perpetual contracts, or perps, are one option traders on Solana have for native exposure to non-native assets. While perps are powerful, their funding rates make trading complex and often make it expensive to hold positions over time. Also, unlike tokens, perps don’t have utility across the broader Solana DeFi ecosystem.

Blockchain bridges do facilitate the introduction of non-native tokens to Solana through bridged tokens, but suffer from what I’ve termed the 'liquidity fragmentation problem'. This issue arises due to the high risk and cost associated with introducing liquidity for new bridged tokens, deterring liquidity providers.

clAssets represent a novel DeFi asset class that we created to effectively onboard liquidity for non-native tokens to Solana. They are essentially bridged assets with supercharged liquidity, boasting enhanced capital efficiency and scalability.

Ishan Pandey: Can you elaborate on the unique features and benefits of Clone, particularly focusing on the Clone Liquidity and Clone Markets interfaces?

Evan Deutsch AKA Mark: As you mentioned, Clone Protocol offers two distinct interfaces, Clone Markets and Clone Liquidity. Clone Markets was built specifically for traders and is the place to trade clAssets. It was designed with user-friendliness in mind, ensuring that both experienced traders and newcomers to DeFi can navigate the platform effortlessly.

Clone Liquidity, on the other hand, was built to allow liquidity providers (LPs) to contribute to Clone through the Comet Liquidity System. Comets offer a brand new level of flexibility for LPs as they support leveraged, cross-margin liquidity using only USDC. We built Clone Liquidity to make navigating these unique positions seamless. In addition to liquidity provision, Clone Liquidity offers advanced components, including the ability to borrow clAssets using USDC, which can be useful for shorting clAssets. Our "wrapper" feature facilitates the swap of bridged assets for cloned assets, essential for arbitrage and price stability.

If you're an advanced DeFi user seeking opportunities to achieve yield within the Clone Ecosystem, Clone Liquidity is your playground.

Ishan Pandey: What motivated the choice of Solana as the blockchain for Clone, and how has the scalability and efficiency of Solana contributed to the capital efficiency of cloned assets?

Evan Deutsch AKA Mark: Our choice of Solana as the underlying blockchain for Clone has been driven by a profound appreciation for Solana's exceptional attributes. In the realm of DeFi, three principles are king: efficiency, scalability, and innovation. Solana excels on all three, offering unmatched transaction speed and cost-effectiveness. When you aspire to create products that embody these principles, Solana emerges as the natural choice.

Our goal isn’t just to bring more tokens to Solana, but also to expand the Solana community itself. By bringing more non-native tokens to Solana, cloned assets invite users from other blockchains to try Solana while trading assets they are already familiar with and trust. We believe this fusion of familiarity and innovation is poised to drive a new wave of growth within the Solana DeFi space.

Ishan Pandey: How do you anticipate the crypto industry being shaped by the introduction and expansion of Bitcoin ETFs, and what opportunities or challenges do you foresee arising as a consequence?

Evan Deutsch AKA Mark: The introduction of Bitcoin ETFs can be truly transformative. One of the central discussions in the crypto community revolves around achieving mass adoption, an immense goal that unfortunately will not happen overnight. However, I firmly believe that Bitcoin ETFs could represent one of the most significant leaps toward mass adoption in the history of crypto. However, I also believe that the significance of Bitcoin ETFs sheds light on one of crypto’s biggest barriers to mass adoption.

This may seem paradoxical, but bear with me. While Bitcoin ETFs will facilitate an influx of capital into the crypto space, they do so because these new investors have a general lack of understanding and trust in crypto exchanges and applications.

The industry will likely dedicate years to addressing this challenge, striving to make crypto products more user-friendly, secure, and accessible to a broader audience. If the crypto space wants to eventually achieve mass adoption, it’s paramount that this challenge is addressed head-on.

Ishan Pandey: Could you elaborate on Clone's business model and revenue streams, highlighting how the platform aims to sustain its operations and drive long-term growth in the evolving DeFi landscape?

Evan Deutsch AKA Mark: A foundational component of our revenue generation comes from trading fees. A small percentage of fees from each trade conducted on Clone is directed to our treasury. We will additionally be managing our liquidity provision strategy internally. At launch, Clone Protocol will serve as the exclusive liquidity provider for all clAssets. This allows us to generate additional revenue from trading activities, especially until the market matures and welcomes more competition in liquidity provision. We will also be running our own arbitrage bot on Clone. This bot serves a dual purpose.

Firstly, it assists in maintaining the price pegs of our clAssets. Secondly, it serves as an additional avenue for revenue generation by taking advantage of discrepancies in clAsset prices. These revenue streams will allow us to sustain operations and continue to grow within the evolving Solana DeFi landscape.

Ishan Pandey: How does Clone plan to navigate regulatory considerations and compliance within the dynamic and evolving landscape of decentralized finance, especially with the introduction of potential regulatory changes or frameworks?

Evan Deutsch AKA Mark: As an open-source protocol built on a decentralized network, Clone Protocol is well suited to achieve compliance in a dynamic regulatory environment. As core contributors, we plan to stay nimble along with the community to adjust the protocol as needed to stay within current regulatory frameworks as more guidance is released by global regulators.

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