Minterest follows a disciplined approach in developing its decentralized finance lending protocol, one born from its founder’s experience and the company’s desire to help provide the rails the industry will need to reach its full potential.
Founder and CEO Josh Rogers has been involved in building startups for 25 years, dating back to telcos in the late 1990s. He’s built content billing engines, co-founded freelancer.com, and was a non-executive director and advisor to the CEO at Hey You, a top Australian order-ahead platform.
He swore he would never build another startup, but then DeFi and its possibilities changed.
Minterest is a DeFi lending protocol built to take a sector-leading role, Rogers believes. It captures and distributes value to its users through an on-chain liquidation engine.
But what makes it different, he said, is Minterest eschews third-party liquidators and has built a protocol that does the distribution itself. The protocol does not need to be economically incentivized to do it.
The protocol takes the liquidation fees, and the interest generated, buys back its tokens, and distributes that to protocol users who stake their tokens and participate in its governance. Team token vesting schedules are five years out.
“And the reason that we’re in it for the long haul is that we think we’re really at the start only of what is a very significant DeFi wave,” Rogers said. “How do you build out foundational financial architecture for the world in a way that is meaningful and is long-term and can evolve as the world does and that as DeFi and crypto do?
“A significant proportion of the team tokens are actually unallocated, and they’re actually never sold. They act as a sync. We have given our team a very small token allocation in the actual team allocation pool, but what really happens is the team tokens, this big sink, earns money from the actual protocol’s buyback in the form of Mint tokens, and we distribute those Mint tokens as an incentive reward through to our team.”
By aligning those incentives, you help ensure various stakeholders share the same priorities, Rogers reasons. It’s a sensible proposition and one which is occurring as more investors seek out DeFi as it is the only current yield source. TradFi is just beginning to move over, albeit cautiously.
DeFi VC rapidly evolving
The current state of venture capital in DeFi is evolving before our eyes, Rogers said. It reminds him of the early days of the Internet when projects were experimenting with all sorts of technologies and solutions as the industry found its way. Venture poured into projects, many of them gambles.
Then came the shakeout around 2002 that saw a flight to quality.
“Everyone stopped funding projects that were very high risk or unlikely to succeed,” he said. “The second thing that happened is that there was a very significant aggregation of users around those projects that generated the most powerful network effects.”
Minterest is designed for those effects, Rogers said, so they are perfectly positioned to capitalize on this shift.
“And from our perspective, it’s almost manna from heaven.”
Rogers sees VC thought vis-a-vis DeFi evolving into a more mature and sustainable phase. Those traditional questions are starting to be asked more often.
But they also recognize the sector is in its early days. Rogers sees a difference in crypto VCs compared to TradFi VCs in their approach and how they participate with their portfolio companies.
Working with 48 firms
He should know. Minterest has attracted participation from 48 firms, with Rogers estimating they pitched to 150. And Minterest did their research. They were fussy about who they pitched to and wanted a geographical spread.
“We’re absolutely delighted in terms of the support our investors provide us, and I think that’s something that I haven’t seen, certainly not at the level that we get in venture capital firms,” Rogers said. “I haven’t seen that in traditional finance, that the level of participation is quite extraordinary and very supportive, but positively supportive and willing to tell you things that that you can’t see proactively. It’s really been quite extraordinary.”
VCs have had a pretty easy time earning returns in DefI, but Rogers believes a shift may be occurring, and it’s good news. There are likely too many people in the space, and the upcoming consolidation will be healthy. Firms have formed to take advantage of the DeFi surge, but we’re coming to the point where quality DeFi projects will have their choice of VCs.
The scene could still look somewhat foreign to VCs new to DeFi. Rogers said he had shaken hands based on trust, something unheard of in the more traditional spaces.
“I think that they come up against the methodology of how people invest in crypto, and I find they find that a difficult speed hump to get over. So look, it’s going to get very, very interesting. I think we’re going to see more money move into the space, larger money, more conservative money, but that money will back much larger, more significant, and more credible projects.”
Works on Moonbeam
Rogers chose to build Minterest on top of Moonbeam, an Ethereum Virtual Machine-compliant platform built on the smart contract platform Polkadot. It’s future proof and an actual Ferrari, Rogers said.
He credited the Moonbeam team for taking that more comprehensive view of how technology will need to operate in a DeFi world more mature than the one we currently see. Additional factors were better gas pricing, lower latency, and more robust security.
With Minterest, Solana, and others, Rogers said the industry should be very excited that alternatives to Ethereum are emerging. It beats the lack of architectural depth he saw back in 2017.
“There wasn’t this necessary architectural infrastructure that could support a huge flourishing cryptosystem,” Rogers said. “And we are seeing that now. Part of that is that there’s VC funding for that, which has become very significant.
“But when you look at the value created by Polkadot, Solana, Algorand, Avalanche – there’s a whole range of these independent networks. When you look at that, the sheer value creation that’s getting caused in those ecosystems, and they’re only just starting back, that is a very significant freight trade.”
People ask Rogers when we can expect the supposedly inevitable tech crash in crypto that came in the Dotcom Era. We haven’t seen one for two decades because of the immense value that has been created over that time.
“Once that freight train started, whether or not prices were too high for a period of time just became immaterial because the freight train just came in and supported that pricing. Was Google too high 10 years ago? Probably, but who cares because the actual value creation freight train behind it is constantly backed is uplifting value.
“In my view, the freight train has left the station in crypto, and it’s really early days. And that means it’s an exciting time to be here.”
Tony is a long-time contributor in the fintech and alt-fi spaces. A two-time LendIt Journalist of the Year nominee and winner in 2018, Tony has written more than 2,000 original articles on the blockchain, peer-to-peer lending, crowdfunding, and emerging technologies over the past seven years. He has hosted panels at LendIt, the CfPA Summit, and DECENT's Unchained, a blockchain exposition in Hong Kong. Email Tony here.