I recently spoke with Bernd Stöckl, the CPO and co-founder of Palmswap, a decentralized perpetual contract trading protocol. In our conversation, we discussed making DeFi more accessible for retail investors, perpetual trading, and DeFi 2.0.
DeFi has the reputation of being the playground for investors with high-risk appetites. However, in recent years, we've seen the industry shift to accommodate average everyday investors. Can you share your thoughts on this shift and why it is essential for the industry's future?
When DeFi first emerged, the focus was on bringing in users and cementing the industry's position. This was done by way of high-risk, high-gain investment products. As a result, the industry became in-hospitable to regular investors looking for steady income growth. However, with DeFi 2.0 on the rise, the industry and all its players are now looking to accommodate regular investors. Low-risk investment products like index funds are making an appearance in DeFi.
This shift is essential because average investors are the majority, and without catering to them, the DeFi industry cannot dream of going mainstream. Tried and tested low-risk financial products from TradFi offered in the DeFi style can cater to investors of different risk appetites. Moreover, investors who want to explore the DeFi space but are deterred by its risky nature will have an easier pathway into DeFi.
That's interesting! For the uninitiated, can you explain in brief what Perpetuals are?
Perpetuals or perpetual contracts are essentially futures without an expiry date. This means that one can hold a position for as long as one wants, and the need to constantly re-establish a position is eliminated. Users can speculate on the value of underlying crypto assets for as long as the contract is held.
In the recent past, Perpetuals gained popularity among crypto investors as they allow users to claim large positions with little initial investment. Earlier this year, the trading volume for Crypto Perpetuals crossed $180 billion.
Okay! Can you further expand on the perpetual trading scene in DeFi and what problems traders are currently facing?
As I mentioned before, crypto investors have shown keen interest in perpetual trading. However, this side of DeFi is still developing, and users do face quite some problems. For instance, most trading platforms do not offer the proper tools required to trade perpetual contracts. Moreover, there's also the issue of high slippage. Because small-cap altcoins have issues with liquidity, it becomes almost impossible to trade Perpetuals without slippage.
And, of course, the transaction fees and other associated costs of trading Perpetuals are very high.
That was insightful. So, can you expand on Palmswap's vision, how it solves these problems, and how it makes Perpetuals accessible to everyday investors?
Sure! Palmswap is a decentralized platform that allows users to trade perpetual contracts on the Binance Smart Chain (BSC) but we are working already on a multichain protocol. In other words, it is a decentralized exchange for perpetual contracts, and we aim to be the safest and the most accessible one. Our long-term vision is to bridge the gaps in the DeFi realm to make superior financial products accessible to regular users.
To make our protocol more accessible to users, we divided it into two versions. On v1, we offer 100% on-chain Perpetuals with a DVAMM settlement model, and on v2, we offer a mix of on-chain and off-chain Perpetuals to ensure fast settlements and optimal slippage.
Perpetual trading is offered in trading cycles that start each week, and users of the protocol can earn tokens by trading in these cycles. They can take up long and short positions or leverage up without owning the underlying asset.
Palmswap also has an extensive set of tools that allow users to take profit, limit orders, conditional orders, and stop losses. This makes the DEX more user-friendly than the ones available in the market today.
Long story short, we aim to build a safe, affordable, and secure perpetual trading ecosystem for BSC in the first step and later on major blockchains through which a new wave of investors can make their way into the DeFi realm.
Well, quite the vision, we can say. You recently had a community fair launch. Can you tell us more about that?
Yes, of course. We held a community fair launch for the PALM token in September this year. PALM is the native utility and governance token of our platform that powers a robust ecosystem of financial products.
As a part of the fair launch, we released 100 million PALM at a low valuation and allowed the community to pump its price. For three days, we collected funds in a pool and decided the valuation of the token based on the collected sum. Every participant pays the same price for the token irrespective of the size of their investment.
This endeavor was quite successful, and we managed to raise over 6600 BNB.
Off to a great start! You've mentioned DeFi 2.0 as the next iteration of DeFi. Please expand on this and tell us how the industry will change for the better.
Yes, of course. The new iteration of DeFi aims to move from a phase of speculation and quick money-making to real-value creation. So naturally, the protocols in this phase are focused on solving some of DeFi's most pressing problems. Of course, we've already spoken about the need to bring in regular investors. But apart from that, problems like lack of liquidity, lack of utility for staked funds, and over-collateralization of loans plague the DeFi industry.
With the help of liquid staking solutions and financial NFTs, the industry is now focused on overcoming these problems to create a truly open, accessible, and robust decentralized financial ecosystem. When DeFi 2.0 is implemented, people across the world will have access to a superior financial infrastructure, irrespective of their socio-economic status.
Well, we'll look forward to it. But before we go, is there any advice you'd like to give investors eyeing this space?
The new decentralized financial ecosystem has a multitude of opportunities for new and veteran investors. With higher yields and better ROIs, the financial products here surpass TradFi by a mile. However, they do come with an associated risk. So my advice to investors would be to grab these opportunities at hand but with caution.
Some research into the financial products and the protocols that offer them can go a long way in ensuring safe investing and trading in DeFi.