- Ben Samaroo is the co-founder and CEO of decentralized finance investing platform WonderFi.
- He shares how he got into the DeFi space and why he is trying to simplify it for retail investors.
- Samaroo also explains how the platform captures the various high-yielding opportunities in DeFi.
As a former securities lawyer at a white-shoe law firm, Ben Samaroo was able to advise some of the first Canadian and US companies that got involved in the crypto space.
While helping companies navigate regulation to help bring crypto products to market, Samaroo himself was drawn to the nascent industry.
In late 2016, he bought his first bitcoin at around $1,000, which sent him down the rabbit hole of devouring any bitcoin-related materials he could get his hands on, and attending crypto meet-ups in Vancouver.
In 2017, he became part of a founding team for blockchain-advisory firm First Coin Capital, which was acquired by crypto billionaire Mike Novogratz’s Galaxy Digital in 2018.
Amid the initial coin offering craze in 2017, Samaroo also discovered decentralized finance. Fascinated by the new ideas coming out of the gate every single day, he began dabbling in decentralized exchanges.
“The decentralized exchanges back then, there wasn’t really any volume on it, it was more like a proof of concept,” he said in an interview. “It wasn’t really until last year that you started to see a lot more activities there.”
Decentralized finance exploded onto the scene when Compound (COMP) — a DeFi lending protocol that allows users to earn double-digit interest on their crypto deposits — started to attract a large number of users to its platform last June. From there, DeFi applications mushroomed in what the industry calls the “DeFi summer.”
“It’s the first time that you are seeing millions and millions of dollars of transactions going through these protocols,” he said. “So they are getting battle-tested not only from a smart-contract perspective but also from a user-experience perspective.”
A $270 billion sector plagued by complexity
Since spring this year, the DeFi sector has been overshadowed by the boom in non-fungible tokens, the rise of play-to-earn gaming, and metaverse-linked tokens.
But the growth of DeFi has shown no signs of slowing. The total value locked across all DeFi platforms has surged from around $22 billion at the beginning of this year to about $276 billion as of Thursday afternoon in New York, according to analytics platform DeFi Llama.
To be sure, TVL is not a perfect measure of the total capital deployed in DeFi as different protocols could measure it differently. Nevertheless, it is one of the most popular metrics used by crypto analysts.
For Samaroo, while the Cambrian explosion in DeFi is a boon for savvy traders, the level of complexity involved in using many of the applications is so high that the average consumer doesn’t have “a realistic opportunity” to use it.
“That’s counter to the reason for this technology, which is to lower barriers and to make access fair and inclusive,” he said. “If DeFi stays in the hands of crypto traders and experts, then you are going to just create a new 1%.”
In the spirit of pushing for greater adoption, accessibility, and inclusion of DeFi, Samaroo co-founded WonderFi. It’s an app that allows investors to earn yields on their deposits, trade or lend their digital assets, and invest in DeFi index funds with just a few clicks.
The company started trading on Canada’s NEO stock exchange in August and recently listed its tokenized shares on Sam Bankman-Fried’s crypto exchange FTX.
How retail investors can earn 2% to 8% in a low-yielding world
Samaroo said the goal of WonderFi is to not only capture the different opportunities within DeFi but also simplify it for the average consumer who does not have the background and knowledge to engage in decentralized lending, borrowing,
liquidity
mining, or yield farming.
As a result, the firm is not looking to invest in the high-risk, high-reward part of DeFi where yields can go to six figures or more in percentage terms.
“We are steering people and curating the platform through the WonderFi app to the opportunities that are tried and tested and have a lower risk profile,” he said.
For example, the firm is lending assets through Compound Finance, which is one of the major lending protocols in DeFi. It also supports ethereum staking, which has been gaining popularity among its users, according to Samaroo.
He estimates that investors could earn anywhere between 2% and 8% in annual-percentage yield, depending on the asset involved. For instance, the firm’s savings product advertises a 4% APY, where $25,000 deposited would compound to more than $83,000 in 30 years. That compares to around $25,454 with a traditional high-yield savings account, according to its calculation.
The wild west or new frontier?
While DeFi promises abundant and lucrative opportunities, it is also an undeniably risky space. So far this year, the overall losses caused by DeFi fraud and hacks have amounted to $12 billion, according to CNBC, citing a report from analytics firm Elliptic.
The fast-moving space, which is often called the “wild west of crypto,” also lacks compliance infrastructure and regulatory clarity.
WonderFi investor Kevin O’Leary explained in a recent interview at the SALT conference that the average investor can’t get into DeFi easily because when they earn interest on stablecoins, for example, they have to report that to the tax regulator and record their tax gains or losses.
“There is no compliance. You have a 1099 form you have to deal with,” he said. “WonderFi is solving for that, it’s going to make it compliant and give you the reporting that allows you to report your taxes, so WonderFi is really for the retail investor.”
Another problem of DeFi that’s harder to solve is the regulators’ call for increasing oversight for the sector.
“I think decentralized finance is a really, really huge sea change in the
financial services industry
,” O’Leary said. “It’s going to cut cost, increase transparency, and do a lot of wonderful things, but it’s going to have to be after the regulator approves it.”
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