Cryptocurrency analyst. Founder and editor at btcpeers.com
Entering the decentralized finance space can often seem daunting. With the help of companies such as Priority Token, that process becomes a lot smoother. Existing technology companies can reach out to a growing network of highly qualified investors.
The growing competition among technology firms ensures uniqueness is of the utmost importance. Catering toward a growing user base is crucial, but achieving that goal is never easy. Taking one's startup to the next level through DeFi is a great way to leap ahead of competitors.
Unlike traditional ways of raising funds, the DeFi industry provides unprecedented liquidity and exposure. It is the hottest trend on the market right now. With over $7.1 billion locked in various protocols and platforms, the industry is firing on all cylinders. Lending platforms such as Aave, Compound, and Maker have attracted a lot of attention. Their token values have also shot through the roof, with every individual project valued at 50% of their total value locked or more.
Aave has over $1.50 billion in total value locked, whereas Maker has $1.42 billion, and Curve Finance comes in third with $1.14 billion. This growth has been facilitated by the overall steep growth of DeFi Total Value Locked. In early June, just under $1.5 billion was invested in these platforms. That figure has now increased by over 450%, and is likely to keep rising. In the past week alone, another $500 million has been added to DeFi platforms and protocols.
Tapping into this segment is a core sign of innovation and embracing new technologies. This is also the type of tech startup that Priority Token aims to extend its services to,
The booming DeFi sector has attracted attention from various companies now exploring this segment. Mainframe, a lending platform, recently acquired Sablier to pivot its business model. Blockchain platform Qtum has announced its renewed focus on decentralized finance as well. Considering how this is only the beginning of what the future may hold for decentralized finance, now is the time to capitalize on the growing momentum.
Engaging with DeFi platforms will let users earn money in return for providing liquidity. Popular current models include lending (and borrowing), yield farming, and so forth. All of these options pose minor risks, but they also provide significant rewards.
These functions will always remain popular, but there will be other use cases in the future. Many more use cases will come to fruition in the years to come. Being part of this new industry at an early stage is crucial.
These ongoing shifts will create many new business opportunities and challenges, particularly where fundraising is concerned. Victor Larionov, CEO of Priority Token, shares his views on this aspect, as well as the broader DeFi segment.
Victor Larionov is confident that DeFi can catalyze growth of the 4th industrial revolution. Decentralized finance is an exciting industry with tremendous opportunities, he says. As an expert on the matter, Victor is eager to share his views on this industry, its evolution, and why more companies need to begin paying attention to it. Below is the knowledge he shared with me during a one-to-one interview.
Andrey Sergeenkov: The DeFi market has undergone massive growth. What is remarkable is the number of companies turning to cryptocurrency. What is driving this change, in your opinion?
Victor Larionov: Being able to recreate financial products and services without middlemen and through decentralized infrastructure is extremely relevant in this modern age. Banks and other financial institutions are responsible for the 2008 financial crisis.
Even during COVID-19, these same organizations have made life unnecessarily more difficult. Issuing helicopter money and stimulus packages sound positive on paper, but it devalues - and can ultimately destroy - any economy.
Quantitative easing has been a standard go-to solution for banks, even though it is an unsustainable business model. Moreover, banks now offer negative interest rates on personal savings, making it unappealing to keep money in a bank account. Putting that money to work and being able to earn better rewards by doing so is attracting a lot of attention for these reasons alone.
Decentralized finance provides this opportunity to people from all over the world. it doesn’t matter if one has access to financial services and products already. The DeFi space welcomes anyone, from anywhere, with little or a lot of money to spare.
Andrey Sergeenkov: Are you surprised by the number of companies currently exploring this new segment?
Victor Larionov: It has been a welcome surprise. I recently read a PwC survey that shows how nearly half of financial intermediaries are targeted by cybercriminals. This is, in turn, one of the reasons why more and more companies explore DeFi today. Ever since Rainier AG decided to shift its approach, others have followed their example.
On a broader scale, the Defi industry is attracting attention from venture capitalists too. Primarily decentralized lending platforms have seen a strong influx of capital. In the Ana.vc report of July, 40% of the closed deals relate to DeFi in fintech. Such a trend never goes by unnoticed in the technology sector.
A recent example of a successful DeFi-crowdfunding combination is Orion Protocol. Its “dynamic coin offering” is a unique model, which allowed the company to secure more than a million. We at Priority Token aim to offer such opportunities to many more companies and startups.
Andrey Sergeenkov: Given this rate of growth, do you expect this trend to continue, or is this a mere flash in the pan?
Victor Larionov: The technology sector continues to grow by leaps and bounds, particularly the adoption of innovative technologies is on the rise, which will give way to more companies providing competitive services.
Most of these companies will, at some stage, be in need of help. Whether it is financial aid, legal concerns, or digital logistics that need to be addressed, it is crucial to offer a helping hand. Innovation, growth, and competition need to be fostered, not stifled.
That being said, all of the projects mentioned above have soared in value and brought significant returns to initial investors. This further highlights the potential of DeFi solutions and what they can bring to the table in the fundraising industry.
Andrey Sergeenkov: Do you have any thoughts on the top DeFi Projects on the market today?
Victor Larionov: Multiple projects have proven to be incredibly successful over the past few months. Projects such as Maker, ChainLink, Band Protocol, and others have made a lot of headlines.
In the case of Maker, it has attracted over $1.42 billion in value locked through its lending platform. Users earn income for providing liquidity to the lending pool, Its MKR token has a market cap of over $573million, a neat increase of 26.9% for the year. MKR is a governance token to vote on different proposals, including debt ceilings, stability fees, and so forth.
ChainLink has been the best performer in 2020 so far. The project provides decentralized data roacles, which have been integrated into various DeFi platforms and exchanges for price information.
In the past year, the LINK value has risen by 631.9%, catapulting its market cap to nearly $5.9 billion. LINK tokens are used to pay node operators for retrieving data for smart contracts. Tokens can also be used for deposits by node operators if contact creators have this requirement.
Band Protocol is only now starting to hit its stride. Similar to ChainLink, it is a scalable decentralized oracle, but one that is blockchain agnotis. The BAND token has gained 242.6% in value in the past year, resulting in a market cap of $267.5 million. Its native token can be used to stake for validating data submitted through the platform. This ensures no “bad data” can exist on the protocol at any given moment.
A more recent example, called MantraDao, also struck a chord. After a successful launch, its native OM token successfully surged to a market cap of over $68 million. This community governed DeFi platform provides financial control to those who want to grow wealth together. Platforms like these are exciting for the entire industry, as they raise the bar by a significant margin.
Andrey Sergeenkov: Which of these projects are you most impressed by and why?
Victor Larionov: Personally, I think that Kava has a tremendous amount of potential. it is a DeFi platform focused on liquidity through top crypto assets, including Bitcoin and XRP. Moreover, it has noted significant interest from Binance Coin users, as BNB was the first supported asset.
Through Kava, users can achieve a high yield on their cryptocurrency portfolio. This can be achieved through community-built applications. One is the native Kava app, which can be accessed through a regular browser. There is also frontier, an intuitive wallet for interacting with Kava on Android or IOS. Furthermore, Cosmostation is a feature-rich mobile wallet to manage one’s Kava account.
The protocol has also undergone not one, but three major audits. This further ensures the project is as secure as possible. Kava also has the backing of major giants, including Binance, Ripple, Huobi, OKEx, Kraken, and others. It has also won the Binance Launchpad Project of the Year Award 2020, and Kava has been referred to as the “Uber of Bitcoin”.
By providing liquidity through supported assets, users can mint the USDX stablecoin. This stablecoin is native to the Kava platform and can be staked for extra rewards. USDX works in conjunction with the KAVA token. The latter token is a governance token, which is staked in bonding curves of network validators.
Currently, one KAVA is valued at over $4, and was sold during the IEO for a price of $0.3 each. The project has a market cap of $111 million, making it a hidden gem in the DeFi space. Binance Coin holders have been actively minting USDX through the BNB pool, forcing the Kava team to keep increasing the limit of the pool accordingly. There is a genuine interest in this project, and one that will keep increasing once more assets are supported.
Now that Binance.com has officially integrated Kava’s functionality into its exchange, the overall liquidity will increase by leaps and bounds. It is the first DeFi platform to be integrated into this exchange, further highlighting the importance of decentralized finance as part of the technology and cryptocurrency industries.
Andrey Sergeenkov: Which DeFi applications will have the most potential?
Victor Larionov: Due to the nature of decentralized finance, it is only normal that monetary banking services will be successful. Current services being explored include borrowing & lending, missing stablecoins, offering insurance, and decentralized marketplaces. While all of these concepts are already being explored, they still have a lot of room for future growth.
The main benefits of DeFi in the monetary system are the instant settlement of transactions, much-needed transparency, removing intermediaries from the equation, and empowering the user, instead of the service provider. All of this will significantly enhance the ease of access for those who otherwise may be unable to access any financial services.
Our society lives in a modern world that requires modern solutions. As far as financial services and products are concerned, they are primarily designed without the current generation of technology in mind.
As more innovative technologies begin making their mark on the industry, financial products and services will need to evolve accordingly. DeFi embodies this era of change, innovation, and inclusivity.
Andrey Sergeenkov: Can, in your opinion, DeFi ever replace banks and other traditional finance entities?
Victor Larionov: The DeFi industry is the next big thing in finance. Leveraging blockchain technology has allowed for many unique use cases that were previously considered impossible to achieve. As banks and other providers continue to struggle to provide appealing services, more and more people will begin putting part of their savings into cryptocurrency and decentralized finance.
Even the most basic aspect - earning interest through a savings account - has become nearly impossible through traditional banks. Negative interest rates make this option unappealing. With DeFi, it is possible to begin earning rewards from day one, and it doesn’t require access to a bank or other intermediary.
Those who get in on the DeFi action will eventually reap the rewards from doing so. Token holders of prominent DeFi projects are already being rewarded, by earning rewards and seeing their portfolio’s value increase over time. Earlier, I referred to examples such as Kava, Maker, Band Protocol, and others.
Now is the time to get in on the action, as there is no indication that the traditional financial system will provide real value to its customers.
Andrey Sergeenkov: What is the key to success in entering the DeFi space as an existing company?
Victor Larionov: One way of entering the DeFi space is by either making a crucial acquisition, such as Mainframe did by acquiring Sablier. Merging one’s existing business model with innovative technology can often have surprising results. In fact, there is no business model that isn’t compatible with decentralized finance.
Any existing model can benefit from decentralized finance, either to give users extra options, or to raise additional funding, or by creating something new entirely.
Up until a few years ago, it seemed impossible to create a brand new financial service or product from scratch. By building a successful and loyal community, a lot can be achieved in any industry today. This does not just apply to firms active on Wall Street, but to any other startup or company eager to explore innovative technologies.
I believe there is significant potential for any project willing to shift [part of] its business model to decentralized finance. Especially if that project is on the cusp of raising additional funds. Pivoting to an innovative business model is a great way to attract investors from all over the world.
Through Priority Token, we will provide the necessary guidance to help any company pivot its business model to DeFi, should they decide to go down that route. This includes validating the business care, development of the financial model, and so forth. We can also provide help to create a token economy and ensure the business thrives as a whole.
Andrey Sergeenkov: Which future DeFi revenue streams do you hope to see?
Victor Larionov: In its current form, the DeFi industry offers tremendous opportunities. I expect there to be a much stronger focus on fund management through decentralized finance, as well as new insurance solutions. These are two industries ripe for disruption, in my opinion, yet they remain largely unexplored as of right now.
Other future use cases I am excited about our innovative payment networks - bridging the gap between finance and cryptocurrency in an accessible manner - as well as seeing more decentralized exchanges.
This latter concept is now primarily found within the cryptocurrency industry, but I hope it can expand to more traditional markets, such as precious metals, foreign exchange, and so forth.
To go along with innovative payment networks, it will be crucial to tap into the necessary liquidity. Building new liquidity relays will pose challenges, but it is something that can be done through decentralized finance. The opportunities in this industry are virtually limitless.
Andrey Sergeenkov: Your company primarily focuses on innovative technology startups. Do you expect to make an impact on existing blockchain and cryptocurrency firms?
Victor Larionov: Cryptocurrency and blockchain firms have been shunned in the financial sector for years. Today, governments and banks are actively paying attention to these technologies. As crypto and blockchain firms keep making their mark, we will be there to support them in whatever way possible. In the past, we have had success by helping cryptocurrency-oriented firms, and we will do everything possible to keep doing so.
Not only are we dedicated to helping fast-growing tech startups to raise funds, but we also provide assistance wherever needed. This applies to legal cases, as well as accessing private capital markets, among other things. By focusing on the core companies exploring innovative technologies, the entire technology industry can be elevated to a whole new level.
Startups exploring machine learning, 5G, fintech, augmented reality, and many other innovative technologies are often in need of funding. Traditional investors may show an interest in these industries, but it is important to tap into all available offerings.
This is where the decentralized finance, or DeFi segment comes into the picture. Tapping into this new stream of capital can prove beneficial to a lot of companies, either as a full-time business model or as a way to secure more funding.
Andrey Sergeenkov: Can you tell us more about the business process by Priority Token to analyze projects applying for a consultation?
Victor Larionov: We see an increased market demand from projects either active in DeFi or seeking to pivot to decentralized finance. This is a logical evolution, as the market has been evolving constantly. We have been there when ICOs first launched, then turned into STO or IEOs, and now DeFi is the next hot trend. We have accumulated a lot of experience in this latter segment over the years, allowing us to accommodate the needs of any blockchain or crypto project and the direction they want to evolve in.
Our service package includes handling both the business and legal side of the equation. If the client requests it, we can even provide technical expertise and help where needed. Our team has ample experience in lending, borrowing, banking services, and decentralized marketplaces.
The audit process includes checking out a project’s documentation and base our recommendations on these details accordingly. We always strive to improve the documentation of any project first and foremost, before setting up a private meeting with private investors or funds. These investors will be chosen based on how their interests align with everything the DeFi project has to offer and wants to achieve.
Secondly, we can help create the necessary details for a thorough whitepaper, as well as help develop the finance model. If the DeFi project issues its own token, Priority Token will lend its expertise to bring value to the token.
Third, our team will conduct a full legal review of all materials, including market tools, the website, and so forth. We also collaborate with Swiss regulators to ensure the token qualifies for issuance and licensing. Incorporating in Switzerland through a local office is also possible, and something we will gladly help with.
In the end, building a successful DeFi project requires a strong community. Priority Token is renowned for its community-building efforts, as well as its writing and publishing of press releases.
Andrey Sergeenkov: Assuming a project receives the approval from your end, what does it mean exactly for that startup?
Victor Larionov: Once we greenlight a project, we will research the options that the company can explore. Entering decentralized finance is not just about finding new ways to raise money, but potentially integrating these technologies into a core product. Our team spans different segments of the industry and can provide support to raise funds, help with legal questions, and so forth. This is in combination with our network of industry experts and Swiss regulators.
Andrey Sergeenkov: When it comes to raising funds for any company, which methods does Priority Token use to make this as successful as possible?
Victor Larionov: Every client will benefit from our extensive network of investors across Southeast Asia. We can even provide targeted connections across Hong Kong, China, Japan, or Korea, for example. Our contacts across the Middle East and Europe will also be of great value. Companies with minor financial restrictions can opt for “late seed” funding to attract mainstream investors.
Newer startups with a growing user base looking to expand their market presence can opt for the traditional business method of approaching venture capital firms. Our Series A/B/C funding option is a perfect fit for that scenario.
Last but not least, we also offer a public scale. This is a solid option for companies looking to go public and make a global impact.
On the cryptocurrency side of the spectrum, we can provide consulting for Initial Exchange Offerings, Security Token offerings, and Initial Coin Offerings.
At the core, we intend to tap into the DeFi industry as much as possible. It can provide an entirely new revenue stream for raising funds, and it has the potential to transform business models to foster future innovation.
Andrey Sergeenkov: What about the initial membership offering business model? Is this also something you support, as it deviates a bit from more traditional fundraising solutions?
Victor Larionov: If a client specifically asks for help with an initial membership offering, that is something we are willing to accommodate. An IMO is a form of presale, allowing teams to gather the necessary funds for their development. One successful instance of an Initial Membership Offering is MantraDao, which is one of the companies we are actively working with. We expect most of our clients to focus on the methods outlined above, but an IMO is also possible, should there be a demand for such a service.
Andrey Sergeenkov: What type of business model do you expect to be most successful in terms of raising funds through decentralized finance?
It is very difficult to determine which “sector” will benefit more from this unique way of fundraising. Any company targeting the 4th industrial revolution can hold the key to success. New technologies, and their potential interoperability, will unlock a wave of new services and products. This trend has become apparent among fintech startups, who are eager to explore AI, machine learning, and other tools to provide more advanced financial services.
Given the growing focus on innovative technologies, companies exploring this particular option will undoubtedly attract a lot of attention. If they need help with raising funds, we will gladly provide them with a consultancy.
Andrey Sergeenkov: What are your thoughts on the role of Bitcoin in decentralized finance?
Victor Larionov: As far as cryptocurrencies go, Bitcoin is the most recognized “brand” of them all. Due to its rising value, and high market capitalization, Bitcoin holders can be a worthwhile audience for technology companies. For Bitcoin users, it remains crucial to diversify their portfolio. Investing in up-and-coming technology companies can help achieve goals for all parties involved.
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