Blockchain and Trends in DeFi; Exclusive Interview with Piers Ridyard, CEO of Radix
Radix is a Layer 1 protocol that has been launched and specifically built for DeFi. Proposing a scalable alternative to Blockchain and DAGs, Radix utilizes an innovative and new distributed ledger that has been built from scratch based on their proprietary Cerberus BFT consensus mechanism. Piers Ridyard, CEO of Radix shares his insights on Blockchain and DeFi in an exclusive interview with Techbullion.
DeFi is the talk of the crypto world these days. What do you consider most exciting about what is happening right now during this DeFi craze?
Innovation. Even as I write this, the total value locked in DeFi is nearly $9Bn USD, last week it had just gone over $7Bn. This meteoric growth is drawing a lot of attention, a lot of builders, a lot of amazing new products to come to life.
On the flipside, what do you consider the main obstacle standing in the way of DeFi becoming widely adopted?
The same — Innovation! The pace of the industry is a double-edged sword. High levels of competition and innovation can be very beneficial, but they also put strain on the infrastructure currently powering the industry — Ethereum.
What is most apparent is that transaction fees are soaring, often into the hundreds of dollars per transaction, meaning all but the largest transactions are either locked out of opportunities or lose much of their potential return in fees.
Security of new applications is also a concern for many, as with the pace of new products there is a race to be first to market can often mean smart contracts are not being audited prior to launch — thus exposing users to risks should something be untoward. Ethereum’s smart contract language, Solidity, is highly complex and in DeFi, a simple unintentional fault can result in the loss of millions of dollars of assets.
Have you used any DeFi projects yourself? Other than Radix, what is your favorite DeFi project to date?
Many! And that is still only a small fraction of what is already successfully launched and running. The crypto and blockchain space has always been fast paced, yet with DeFi even being active 24/7 can’t keep you completely up to speed. That is why at Radix we encourage our whole team to test out different DeFi products and we hold a bi-weekly all-hands “DeFi teaching” session.
Picking a favourite project is incredibly hard, but I have been incredibly interested in the progress applications such as Argent and Zapper.fi are making in simplifying access to the DeFi ecosystem. I also think what Perpetual Protocol and Potion.Finance are doing are incredibly interesting.
Which future DeFi use case that isn’t possible today due to limitations in technology do you consider most exciting?
True mass adoption and composability of DeFi application. In essence, DeFi is the unbundling of financial services that can then cater the specific needs of users rather than the one size fits all approach of traditional finance.
The first major hurdle here is making the applications user friendly. As I have mentioned, services such as Argent and Zapper.fi are already making strides in that department, but there is still quite a steep barrier to entry.
However, the Ethereum blockchain is already creaking under the pressure of the current level of DeFi, let alone if a sizable chunk of the multi-trillion dollar finance industry moved across to public ledgers today. Sharding is the most common approach to solving this issue, and something Ethereum 2.0 is pursuing. The problem there is that it breaks composability (the ability for these different applications to work together inside a single block) — one of the key benefits of DeFi.
What are your thoughts on yield farming (and liquidity mining)? I think you’ll agree that it is very complicated, even for veteran crypto users. Do you think it will exist for a long time, or does the concept of yield farming itself have a shelf life?
The challenge with yield farming is that the basic principle is very similar to much of the traditional finance world — providing assets (liquidity) to markets in exchange for interest and then layering those returns into other markets. In this respect, yield farming will exist for long term as users will shop around for the best returns.
What won’t continue long term is the current levels of (potential) returns. Many liquidity incentives are a way to reward early backers in new applications and platforms, where a higher rate of return is offered on a limited time basis to offset the risk of backing a new venture. Due to the rapid rate of innovation in the space, there is a lot of competition to attract assets and thus the liquidity incentives are constantly being pushed higher and higher. As the market and industry matures and the major platforms solidify market share, these rewards are likely to return to more normal levels.
If you think it’s here to stay, what needs to change in order to make it more approachable for novices?
The ability to enter and exit various positions and improvements in explaining the risk profile of different opportunities. I also think that easy ways of hedging positions are going to be vital to the long term success of this sector.
Because of the surge in transaction fees caused by the growth of DeFi, it is currently prohibitivly expensive to move into and out of opportunities. Even if you have the correct asset in your wallet, it is not uncommon for the Tx fees to exceed $200 to deposit and then withdraw your funds from a smart contract. As a result, only extremely high value transactions or opportunities that have extremely high potential returns justify the cost.
The other (and potentially even more important) side to this is that due to the speed of innovation, being early into a new project can maximise the opportunity. However, this often doesn’t leave time for users to access the risks associated. From bugs in code to impermanent loss, there are plenty of legitimate ways to end up losing money — let alone bad actors. Finding a way to find opportunities and then accurately evaluate the risks is something that even the most seasoned DeFi expert can still struggle with — not to mention as always, the greatest returns are often matched with the greatest risk!
The industry needs a solution to both the massive network congestion that is stopping the everyday person from interacting
Ethereum gas costs are absolutely out of control at the moment. Could this become a problem with Radix as well? And if not, how does Radix solve this problem?
Ultimately, high gas costs are a direct result of a network exceeding it’s scalability. One of the core goals of Radix is to solve this scalability issue. This is achieved thanks to our Cerberus Consensus protocol that uses a unique method of state sharding that provides linear scalability while maintaining composability.
The result is a network that can scale to orders of magnitude more than even the peak of the NASDAQ or VISA network: the scale needed for mass adoption of DeFi.
Whenever a new farm is launched, there’s always a lot of concern from early users and other onlookers about the security of the farm’s smart contracts, and rightfully so. How does Radix help mitigate this?
There are two elements to security risks of a new contract — accidental mistakes and intentional bad actors. Ethereum smart contracts are coded in Solidity which is a highly flexible language. This flexibility can be beneficial as it allows nearly anything to be coded, however, it also means that it is hard to account for unexpected or fringe outputs. In many situations, these unexpected outcomes don’t cause much issue, but in a DeFi application, this could result in the loss of assets, potentially millions of dollars worth.
Smart contracts on Radix take a very different approach, using programmable Finite State Machines rather than Turing complete code. This approach is often used in mission-critical applications already, due to the predictable and secure nature of outcomes. We call these Radix Smart Contracts “Components”. The other benefit here is that developers are incentivised to provide useful Components to the Radix network which can then be used or built upon by other developers, allowing them to leverage existing battle-tested code.
What can you tell us about Scrypto, the programming language used to design dApps on Radix? Is it similar to some other popular programming languages used today?
Scrypto is a functional programming language that allows developers to create conditional finite state machine components that can be deployed and added to the Radix on ledger component library.
Erlang and Haskell are two popular examples of functional programming languages, but as Scrypto is currently under development, we don’t yet have a huge amount to share about it publicly.
A smart contract platform is unlikely to be useful if nobody is using it. And it’s unlikely that people will use it if developers aren’t building useful dApps on it. How does Radix plan on incentivizing development on the platform and generally countering Ethereum’s massive head start?
Our go-to-market plan is focused on three key areas. Access — the ability for users to on and off-ramp assets into the Radix ecosystem. Liquidity — the ability for users to swap and interact with these assets. Choice — a variety of applications users can engage with.
Each of these feed into each other, as with more assets, there is more liquidity, which encourages development (choice), that drive more assets to enter the system.
This does also create the same chicken and egg problem that all platforms face! The first step is that Radix is committed to building the initial steps for each of these. With the Radix Wrapping service and our partnerships with projects such as REN, we are providing an easy way for users to bring their assets into the Radix Ecosystem. Having StakeHound, our newly announced an incubated product launch, provides liquidity to users. And finally, we will be building the first Components for the Radix network.
That just gets us through the bootstrapping phase, past that there needs to be clear incentives for developers to build on the platform. One of the core features of Radix is our on-ledger developer royalties system. Unlike a developer fund where one time grants may be issued, royalties provide recurring revenue for developers by enabling them to set a fee for each time their Component is used.
A great benefit of Components is that they do not need to be full applications — a developer could make one that is a simple function that another developer may need to use in their application. This means if a developer makes a Component that would provide value to multiple other Developers (say a liquidity pool function), it can provide them recurring revenue while also enabling future developers to build on top of it, allowing faster deployment of applications.