What is Idle Finance? | The founders explain
Who are you and what do you do?
Matteo Pandolfi, CEO of Idle. As I usually say with my team, I work on everything but code. This means product management, business relations, operation (mainly legal or accounting), branding and marketing for Idle. Together with the team, I work on rebalance algorithms, business/token models, risk assessments, governance structure, and customer care.
How did you come up with the idea?
At the end of 2017, we started a couple of side projects while we were working full-time: William and I worked on an arbitrage bot on different DEXs, supported by an Italian university, while Samuele and I were working on an algorithmic trading bot on CEX and DEX.
When Compound came out with his v1, we saw the opportunity to add a “passive-income” component for funds that were idle (inactive) when the strategies weren’t operating. We started building on that, but when we got into dYdX and bZx protocols, we decided to aggregate them.
Initially, we wanted to create a weighted index of different interest-bearing tokens (to mimic what LIBOR for traditional finance), but then we found a way to optimize funds management in order to optimize yield. We decided to pivot to that value proposition, which is the current logic on Idle.
In June 2019, we decided to participate in a hackathon on Gitcoin with Consensys Relay. We won it and we got contacted by ConsenSys. After that, we dived into user testing and product validation during ETHBerlin (August 2019) confirming part of our assumptions and collecting good feedback on what features we needed to implement in our v2.
In September 2019, we got accepted into Tachyon acceleration program in NYC, getting initial funding and mentorship.
What were some of the learnings along the way?
Something we learned along the way is that fast iterations thanks users’ feedbacks are definitely important. There’s no point to build a perfect product immediately, it’s way better to test it with users and improve incrementally the product.
On a technical side, we immediately learned about the “PingPong effect”, which is an edge case for yield aggregators: when optimizing interest rates return, you need to take account of funds you’re moving across different lending protocols, otherwise you can create an infinite loop. This has been solved in Idle v2 with our Dynamic Funds Allocation.
Learning from what happened in the last few months on DeFi protocols, we are going to implement a liquidity-aware rebalance, which has an on-chain computation for mint/redeem amounts on each lending protocol integrated into Idle, and a way to vet liquidity risk profiles of underlying protocols, which actively triggers a watch window and allow to partially redeem liquidity once became available.
What surprised you while building Idle?
DeFi ecosystem is one of the most collaborative spaces but highly competitive and with low margins for mistakes. The innovation pace is very high here, new products and tools come out every week and you need to keep up with it.
How is the blockchain and DeFi industry in Italy?
Very few Italian teams are working on DeFi, but the user community is big and really active (~800 users in DeFi Italy telegram chat).
Where do you see yourselves in 6 months and 6 years? What’s the vision?
In 6 months, we want to provide a seamless way to optimize lending returns, minimize risk, and get insurance services.
In 6 years, we see Idle as a dev/entrepreneurs platform to create yield-related applications with access to all DeFi services thanks to an easy and fully comprehensive APIs (lending, insurance, allocation strategies, LPs integration) with blockchain complexity abstracted away.
What do you need to grow to the next level?
The main aspect we are working on right now is liquidity and on-chain elapsed time (aka battle testing). Once we improved that, as well as our UI/UX, we will launch our API services with a dedicated SDK for easy integration. On a more long-term
Who do you see as your competition?
The former is really appreciated by traditional finance users and has a large and professional team working on it, yet they have a centralized architecture. The latter has been made by a great developer, which has been fast as hell on developing it; however his architecture and mechanism are not entirely explicit: it’s not clear if it avoids ping-pong effect, some integrated protocols stated on the website are not actually implemented, and seems like it isn’t automatically rebalancing funds. His growth hack was integrating with Curve Finance.
Who’s behind Idle and what are your respective roles?
Idle team is composed by William, our CTO, which is managing all of our smart contract architecture and algorithmic logic. He has 8 years of experience as a software developer and worked for different startups in the biggest startup incubator in Italy (H-Farm). Samuele, our CPO, is working on the front-end and back-end of our product. He worked in London, building payment infrastructure for one of the main betting platforms, and then started his own web agency in Italy, building different custom CRMs and invoice management platforms for Italian companies.
We are long-time friends, from the same city (Treviso, close to Venice), and it’s more than 10 years that we work together on different projects.
Are you looking for collaborators? If so, what sort?
We are currently raising our seed round, and once done that we will be looking for another smart contract developer for further integrations, an APIs engineer to provide and maintain a more reliable integrators’ infrastructure, and a community manager.
What are your thoughts on the current state of DeFi and what do you think it needs to progress?
I believe that we still have barriers on fiat onramps and web2-like logins, it’s difficult to onboard non-crypto users without spending an entire day on educating them. I’m looking forward to finding other use cases for lending/borrowing to improve liquidity in-flow, and we have some good ideas for that.