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July 04, 2024

The Past, Present and Future of DeFi

This article summarizes key points from a discussion between Uri Klarman, CEO & Co-founder of Bloxroute Labs, and Sunny He, Partner of HashKey Capital, discussing the latest developments in DeFi and the role of Bloxroute at REDeFiNE TOMORROW 2024.


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Bloxroute: The Heart of Speed in DeFi

  • Founded in 2018, Bloxroute is a leading technology company specializing in high-speed transaction and block propagation, with an average propagation under 140 milliseconds.  

  •  The company started from Uri's PhD thesis at Northwestern University.

 

DeFi: Transforming the Global Financial System

  • DeFi is making the financial system more transparent and inclusive, unlike the traditional centralized finance (CeFi) model. 

  • DeFi removes barriers and allows everyone to participate.

  • The evolution from Bitcoin's simple money transfer system to DeFi's complex executable programs is a significant leap forward, unlocking a world of innovation.

  • This shift from simple transfers to programmable commands turns the blockchain into a computer with memory, enabling the creation of decentralized financial programs (DeFi), which are the core of the DeFi ecosystem.


Bloxroute Grows with DeFi

 

During the DeFi boom in 2020, the demand for fast information flow was crucial, and Bloxroute was well-positioned to meet this need. The company then experienced rapid growth and captured a significant share of the DeFi market.

  • When DeFi took off in 2020, people wanted to track their transactions, prices and transaction statuses in real-time, making the ability to receive and send information quickly extremely valuable. Bloxroute was well-positioned to support the need.

  • Leading to Bloxroute’s rapid growth and a 40% market share in DeFi among major users.

 

From 0 to $10 Million ARR!

 

Bloxroute achieved remarkable growth, going from a company with no revenue to one with an annual recurring revenue (ARR) of $10 million within just five quarters. Notably, 40% of all DeFi volume comes from the largest traders using Bloxroute's services.

 

 

MEV: A Major Challenge for DeFi

 

  • MEV (Miner Extractable Value) refers to the ability of miners to exploit users who make transaction errors.

  • The problem of MEV arises from front-running and sandwiching, where one trader can interfere with another's transaction, not because they want to trade faster, but because they see the other party's transaction and use that information to their advantage.

  • Bloxroute is actively involved in solving this problem by creating MEV Relays, a system that assists users by acting as a trusted intermediary.

  • Bloxroute is developing solutions on Solana to incentivize validators to be rewarded for their proper validation of transactions, rather than resorting to front-running or sandwiching for profit. This focuses on directly addressing the short-term incentives that cause MEV.

 

Propelling DeFi as a Formidable Competitor to CeFi

  • Uri's key motivation is to drive DeFi to be able to compete seriously with traditional centralized finance (CeFi).

  • He believes that DeFi needs a strong infrastructure, not just temporary solutions.

  • While concepts like "Intents" (where users specify their goals) may seem useful, Uri points out that they may not be enough to match the efficiency of major markets like Nasdaq or NYSE.

  • He sees limitations in applying Intents and RFQs (Request for Quotes) to DeFi, as they may not result in the best prices for users. Uri is looking for other ways to help DeFi compete effectively with traditional finance.


Summary 

In conclusion, Uri and the Bloxroute team are committed to bridging the gap between short-term and long-term incentives. They aim to bring transparency and efficiency to DeFi by addressing issues such as speed and MEV, and by creating fair mechanisms for validators. Their goal is to build a financial system that is transparent, efficient, and competitive with traditional finance.

Watch this on Youtube: https://youtu.be/SuLXiKhxEWQ?si=-cg-Y9l-XWu4j943 

 

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