A messy brain dump on why Tori (an app we built that was the easiest way to access 7% APY via Aave), failed.
The initial hypothesis in 2024 was that retail wanted to access DeFi, but it was difficult - wallet set up, onramps, accessing DeFi was still hard.
If we made this easier with Privy / Plaid / DeFi abstraction, users will want this product.
The initial hypothesis in 2024 was that retail wanted to access DeFi, but it was difficult - wallet set up, onramps, accessing DeFi was still hard.
If we made this easier with Privy / Plaid / DeFi abstraction, users will want this product.
However, we learned a bunch - compiled my notes below:
➤ Alot of it came down to how users psychologically measured the risk/reward of using Tori.
➤ The rates on Aave/Morpho vs the the high interest rate environment that we've had in the past 2 years didn't make sense for non crypto natives to take the risk on their principal.
➤ Because users could hypothetically lose their principal, the risk / reward didn't make sense (it turns out that users actually care about FDIC!).
➤ Alot of it came down to how users psychologically measured the risk/reward of using Tori.
➤ The rates on Aave/Morpho vs the the high interest rate environment that we've had in the past 2 years didn't make sense for non crypto natives to take the risk on their principal.
➤ Because users could hypothetically lose their principal, the risk / reward didn't make sense (it turns out that users actually care about FDIC!).
➤ What actually made sense were crypto products where you took a higher risk, with a higher reward (aka Moonshot, memecoin trading apps). I failed to recognize memecoins as an asset class retail wanted to trade.
➤ Users got burned by Celsius/FTX, so had hesitancy towards using Tori and crypto in general. Even though we were self custodial (unlike Celsius), there's still hypothetically a chance users would lose their funds.
➤ Users want a fixed APY (ie 4% APY), not volatile/constantly moving APY's (even if it averages out). I'm excited to see what Morpho cooks with their fixed rates product.
➤ Users got burned by Celsius/FTX, so had hesitancy towards using Tori and crypto in general. Even though we were self custodial (unlike Celsius), there's still hypothetically a chance users would lose their funds.
➤ Users want a fixed APY (ie 4% APY), not volatile/constantly moving APY's (even if it averages out). I'm excited to see what Morpho cooks with their fixed rates product.
➤ As we had to educate retail on the advantages of DeFi lending APY (ie self custody, potentially earning more), we also had to describe how Aave works (ie overcollateralized loans, etc).
➤ This turned out to be a losing battle and turned out to be high CAC, given that we had to explain / educate.
➤ One thing I've learned is you ideally want customers who already understand the value prop and looking for a solution, or figure out a way to explain your value proposition in the span of a Tiktok video (which for Aave, is quite hard).
➤ This turned out to be a losing battle and turned out to be high CAC, given that we had to explain / educate.
➤ One thing I've learned is you ideally want customers who already understand the value prop and looking for a solution, or figure out a way to explain your value proposition in the span of a Tiktok video (which for Aave, is quite hard).
Evolved hypothesis was that targeting general retail was hard - so the only market who would want consumer DeFi wrappers would be crypto natives or this market in the middle (ie what we called crypto curious).
➤ However, given that crypto natives were already technical enough to go into Aave/Morpho themselves, wasn't valuable enough as we took a fee on some of the APY.
➤ Coinbase also had rewards on USDC that were less "risky" vs smart contract risk (ie USDC rewards), this turned out to be a better product for the crypto curious.
➤ There's also no such thing as a "crypto curious" market imo - or it's incredibly small.
➤ However, given that crypto natives were already technical enough to go into Aave/Morpho themselves, wasn't valuable enough as we took a fee on some of the APY.
➤ Coinbase also had rewards on USDC that were less "risky" vs smart contract risk (ie USDC rewards), this turned out to be a better product for the crypto curious.
➤ There's also no such thing as a "crypto curious" market imo - or it's incredibly small.
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