The DeFi Collective celebrates its first year anniversary

The DeFi Collective is now one year old. In twelve months, it jumped from a crazy idea to a positive influence for DeFi’s public goods with increasing impact. To understand the journey entertained so far, we must go back, before the existence of the DeFi Collective was even revealed to the public.

Genesis of the idea

The first iteration around the idea of the Collective started in early 2023, as we realized even maximally decentralized projects have needs that require human intervention, such as:

• Launching tokens on new chains and DEXes
• Providing liquidity support & running optimized liquidity strategies
• Processing complex on-chain data and making it accessible to a wider audience
• Running bots for certain operations, such as liquidations
• Hosting and operating front ends
• Etc.

Often, such operations are not immediately profitable to the teams performing them, which translates into uncertainty for projects. To ensure they are consistently performed, they must provide incentives (e.g., Liquity v1 front-end incentives), direct and maintain funding to third parties, or have team members themselves perform these tasks.

Thus, to exist and thrive, maximally decentralized projects needed a new type of structure able to handle such missions and more, freed from the need for continuous external funding: enter the early DeFi Collective.

Early donations and support

To exist, the Collective needed its own assets, enabling it to both generate revenues to cover its expenses autonomously, and provide on-chain and concrete support to the protocols that are part of its scope. Doing so required initial donations; no strings-attached donations, as it was a necessity to preserve the Collective’s autonomy and independence.

Finding projects willing to consider such an endeavour was difficult, as it required faith in the Collective’s vision and its boardmembers’ capacity to deliver on it. Only a handful of teams were even willing to contemplate donating to an association over which they had no control and that did not directly benefit them. All of the top 10 DeFi protocols contacted refused.

Thus, we remain forever grateful to the few who did, our early supporters that enabled the Collective’s existence; they are not many, but incredibly impactful: Liquity, CatInABox, Diva, DYAD, Maverick and Retro Finance.

Despite being a non-profit association, the DeFi Collective has been self-sufficient from day one. The revenues it generates far outweigh its expenses. We instantly understood this feature as necessary, providing the Collective with the autonomy necessary to fulfill its mission. Moreover, the Collective’s self-sufficient dimension allows it to tackle “uninvestable” ventures, such as assessing the effective decentralization status of DeFi protocols.

Indeed, such endeavours cannot be tackled by regular projects, simply because first, they have no obvious path towards monetization and even more importantly, because their very existence threatens many players of the industry thriving off information asymmetry and misleading investors. For instance, when Bluechip released its stablecoin ratings backed by a solid and public framework, some teams, displeased with their project ratings actively tried to defame Bluechip and dampen its credibility.

A DeFi party that walks the talk

The DeFi Collective is a one-of-its-kind structure. We sometimes describe it as a “political party for DeFi that walks the talk”. Indeed, the Collective manages its own assets, but it does it an opinionated manner, framed by its Treasury Management Policy: funds are allocated to the most resilient and decentralized protocols, and used in order to support the growth of protocols delivering on the ideals of the space.

All of the above is done in full transparency, and the DeFi Collective is pioneering on the matter, being amongst the first associations to operate fully onchain and provide comprehensive monthly reports and quarterly summaries. Anyone can assess the state of the treasury at any time and the usage of the funds:

1. The main treasury operations, such as providing liquidity or mobilizing liquidity-directing tokens are conducted at deficollective.eth.
2. Grants are received and mobilized at grants.deficollective.eth.
3. Finally, expenses incurred are all funded from the accounting.deficollective.eth.

The excess generated from the treasury management activity (we call it the surplus: the % of revenues remaining after expenses are covered) is entirely compounded into the treasury and use to further grow the Collective’s footprint. It averaged 78.59% in our first year of operations.

The surplus enables the Collective to envision and tackle initiatives that are unlikely to be funded by any profit-driven actors, such as the evaluation of the decentralization status of DeFi protocols, and other similar endeavours to follow. It gives it margin to entertain unprofitable yet necessary endeavours, like supporting essentials causes with donations such as Bluechip, Smoldapp & 0xKhmer – an activity we’re looking to ramp up this coming year.

Second year’s prospects

Our focus for the second year are clear: providing the ecosystem with a comprehensive database allowing anyone to evaluate the decentralization status of DeFi protocols – DeFiScan. Although we’ve built the framework and tooling internally, as well as the first batch of protocol reviews, we pictured it as a collaborative effort from the get go, and design the infrastructure to enable easy collaboration from the project teams themselves, or DeFi buffs really nerdy about a given protocol.

Starting with a handful of protocols reviewed on this first release, our ambitious target is to have the majority of the top 100 protocols evaluated by next year. We’ll develop several programs to that end, including incentivizing the submission of protocol reviews for specific essential protocols. Each review written collaboratively will be verified by a vetted Collective member to ensure quality, accuracy and consistency.

Next to the protocol reviews, our main arc for the year, we will of course continue to provide onchain support and offchain advising to relevant and critical DeFi protocols, as done since our inception, with the support we’ve provided to PoolTogether, Dyad, HAI, Diva and many more. In this second year, we want to focus particularly on delivering this support to nascent, even pre-market relevant protocols, as we realized this is where we can be the most impactful.

To deliver on these two goals and more, we’ll be, of course, expanding the team of contributors further. We’re open to considering all kind of profiles for hires, as most current contributors essentially created their own roles, yet we’re particularly looking for two specific profiles:

1. [Technical] A protocol reviewer, at ease reading and understanding what’s happening in a given protocol, down to the contract level. He/she will be assisting with the protocol reviews - it’s a great position if you’re already familiar with Solidity and want to beef up your understanding of the top 100 DeFi protocols.
2. [Business] The ants are looking for their BD essentially: someone with a solid understanding of DeFi (although not necessarily a dev), but more importantly a great touch with people, very structured and organized. His/her main job will be monitor, hunt and pursue relevant collaborations opportunities for the Collective.

All the contributors of the Collective are working remote, and part-time contributor are welcomed. Feel free to reach out on the Discord or Twitter for more information.

First year’s highlights

Summarizing a whole year of development is a tedious task, yet we would like to present some essential results achieved in the first year of existence of the Collective.

Operating an association fully onchain

As we are convinced by the merits of DeFi, it seemed essential to us to operate almost exclusively onchain All contributors are paid in LUSD, as well as expenses as much as possible.

Providing maximal and contextualized transparency on treasury operations

Being onchain is not enough: we want to ensure that anyone can audit the Collective if desired. A three-multichain-Safe wallet management system (detailed previously) was devised and implemented to secure the assets as well as clarifying the usage made of the funds and two cornerstone documents, the Treasury Management Policy and the Reporting Policy have been implemented provide further framing and context to our treasuries activities.

Risk-Weighted and ambitious treasury management

The logic harnessed for the treasury operations enable to both maximize the Collective’s staying power, as it can already face more than three years of expenses even with 0 income thanks to its stablecoin reserve, while a more ambitious management of the surplus – unneeded for expenses – enable the Collective to position itself in size and early to relevant projects, as done with AERO (from October 2023), or DYAD (from December 2023).

Synergies with relevant projects

Although the Collective self-appoint to support the projects deemed the most relevant for the success of the overall DeFi ecosystem, it explores and persues collaboration opportunities when possible. Thanks to the work of our contributors, two live projects recognized the contributions provided by the Collective, and allocated resources to supercharge the effort: PoolTogether DAO (April 2024) & PossumLabs (May 2024).

Establish a presence for the Collective in the space

Growing the presence and audience of the Collective is key to its objectives, and several endeavours entertained in the first year helped making stride in that direction, including: our presence at ETH Belgrade & ETHCC, several interviews and podcasts, and the publication of in-depth articles on topics relevant to the Collective’s expertise: Software licenses for DeFi, Making the most of Gnosis Safe: toolbox & tips, A deep dive in the limitations of Concentrated Liquidity, etc.

Growing the team all along the way

To achieve all of the above, growing the team of contributors was a necessity, and a sizable focus of the boardmembers in its first year of existence. Thorough the year, five contributors have been onboarded:

• Luude (Oct/Nov 23), key contributors for the Treasury Management Team.
• Cooking (Early 24), our first “grant hunter”, now also helping out with the protocol reviews.
• Cyril (April 24), hired as a content strategist, and who ended becoming much more thanks to fast growing Dune Analytics skills.
• Stengarl (July 24) who was already a familiar face in our community, and thus a perfect fit for his role of Community Manager.
• Yves (September 2024), who built the Permission Scanner, amongst other technical work related to the protocol reviews.

Celebrating the first year anniversary

Emboldened by the results delivered in the DeFi Collective’s first year of existence, and even more thrilled for what is coming next, we decided to celebrate the first successes of this project as ambitious as it is essential. Thus, we decided to structure the one year anniversary of the Collective into a sort of festival, that will span over three weeks:

• Starting today and until November 6, you can mint the celebratory anniversary NFT.
• This Friday, we will publish the yearly financial statements of the Collective.
• Next week, we will publish the v2 of the protocol guidelines, the backbone of DeFiScan – the upcoming protocol decentralization stage scanner tool.
• By the end of the month, DeFiScan will be released.
• And finally, we will kickstart the incentivized protocol reviews campaign.