Part two of a two part series
In our last article, we discussed some of the main hurdles that users face trying to use DeFi. In this article, we will discuss the ways in which Athena Finance helps alleviate those obstacles.
Fees and Delays
Athena Finance is built on Ethereum and while Ethereum 2.0 is still 1–2 years away, there is plenty of L2 infrastructure available right now in a usable form. This includes Polygon, zkSync, Optimism, Arbitrum, State channels, Plasma, Validium, Sidechains, and various other hybrid solutions. The Ethereum L2 ecosystem is becoming increasingly competitive and already has significant traction. Athena Finance plans to onboard to one of these L2 solutions which should reduce both fees and transaction times by several orders of magnitude. Users won’t have to wait hours for transactions to clear or spend potentially hundreds of dollars on failed transactions. This one solution alone will single-handedly lure in more users into DeFi than any other.
Athena Finance will have models that generate risk scores so that users can determine which investment is right according to their risk preference. These models will use machine learning to weight multiple variables including strategy history, TVL, likelihood of hacks, the nature of the protocol, use of stable vs. free floating tokens, and many others. It would be very difficult for a single person to evaluate all of these data points and come up with an objective conclusion, but Athena will provide this information for every and any investment strategy included in the platform.
The investment strategies included on Athena are designed to be relatively predictable. Investment strategies are no good if the APY immediately collapses, so users need some assurance that the strategy is viable long term. For this reason, Athena will choose strategies that already have a proven track record and generate good returns not only in absolute terms but on a risk-adjusted basis as well. Athena will also integrate fixed-rate interest rate yields once their underlying DeFi primitives mature and become sufficiently de-risked enough to integrate.
Black swans are intrinsically unpredictable, but that doesn’t mean that Athena can’t protect its users against them. When users invest in our platform, they will be safeguarded from economic and smart contract risks in two ways: 1) through the automatic purchase of insurance, and 2) an emergency treasury designed to make users whole in case they lose money due to said risks. Having both instead of one or the other ensures that users can recoup as much as their funds as possible should any black swans occur. It also helps having both solutions in case there is not enough liquidity available on insurance platforms or if the emergency treasury does not contain enough funds to pay out all of the losses. While these measures may never be 100% foolproof, they will go a long way in ensuring the safety of user funds.
Uncertain tax implications
All taxable events will be tracked so that users can easily tabulate the taxes owed. This includes both long- and short-term capital gains taxes. In the future, Athena plans to integrate with industry-standard tax platforms such as TurboTax (or other tax platforms with a non-US focus) so that this data can be directly compiled with tax data from other sources. There are already some crypto-native tax platforms that calculate DeFi transactions for you, but they are a separate product independent of the actual investment platform and often make mistakes calculating taxable events for DeFi events. Moreover, Athena will allow users to not only track taxable events but also optimize them by keeping track of lots for every deposit and allowing users to choose when certain taxable events are triggered.
Athena will partner with fiat onramps such as Moonpay, Onramper, Transak so that users who do not own crypto can seamlessly convert their fiat into their crypto asset of choice. This will work bidirectionally: users who have crypto and wish to cash out to fiat will be able to use the same ramp to do so. For users who already have crypto and are ready to use Athena without an onramp, industry standard web3 wallet integrations will also be available.
There are many performance trackers in the DeFi space but none that get it quite right. Some just track the performance of the investment strategy — this is not useful to users who just want to see how their invested funds are performing. Other dashboards track the entire portfolio but not the individual assets. Athena will track everything: both the performance of the strategy, the portfolio, and individual investments. This will enable investors to establish benchmarks to compare their investments against.
Athena aims to be as simple to use as possible. There will be no overly complicated UI or overwhelming number of options. The UI is designed to be minimalist and clutter-free. Educational content will abound for those users who seek to understand both the platform and DeFi in general. Our guiding principle is to be easier to use than traditional centralized financial platforms such as Wealthfront, Vanguard, or Fidelity. Considering the complexity of crypto, this is no easy feat, but we’re committed to onboarding the world to DeFi through sublime simplicity.
Helping users earn a higher yield is just a beginning. Athena plans to help everyday investors utilize many other DeFi primitives. Stay tuned for another post on this topic!