DeFi has a bubble, but organic growth also has a magic weapon


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Liquidity mining is an excellent solution to activate short-term liquidity, but DeFi needs to use composability, fair start and other methods to achieve sustainable growth.

Written by: Vadym Nesterenko, Atomica Product Manager, Risk Transfer Agreement Compiler: Perry Wang

Since the extensive introduction of liquid mining strategies in DeFi projects, the total assets locked in the DeFi agreements have grown rapidly, which shows that if these agreements want to cold start or achieve liquidity expansion, liquid mining is effective in the short term. Strategy. However, the high annualized rate of return APY will not last forever, making this growth a controversial topic: Is this conducive to sustainable protocol development, improved feature design, and target customers? Undoubtedly, it is a good tool to improve initial liquidity, and more importantly, distribute governance tokens to the users of the agreement. The ultimate goal is to let the token holders control the future of the agreement.

In the traditional field, the organic growth of product management and marketing refers to the acquisition of users without paid advertising. In the field of encryption, such paid advertising can be equivalent to liquid mining. We need to study whether liquidity mining is a key method to stimulate the organic growth of DeFi. At the same time, I also hope to provide an action manual for new entrants so that we can build and expand great products based on the pioneers’ experience.

The question immediately arises: What is special in the DeFi field? After all, there are countless materials about the growth of startups.

This question is very interesting, let’s first figure out the inherent limitations of DeFi products:

  1. Most encryption users value their privacy, which makes it more difficult to obtain insights from user research and running usability tests. In addition, the DeFi user base is not large enough to make data-driven decisions through a/b testing and analyzing large examples. However, there are still many outgoing enthusiasts willing to help in this regard.
  2. In this market, paying to solicit users is not common. First of all, when a start-up company performs product verification, needs to expand and create a clear business model, it is reasonable to pay to attract traffic. The DeFi we are currently discussing is not at these stages. Secondly, forced advertising is likely to bring more negative effects.
  3. Decentralization means that developers take more responsibilities, which means that DeFi products using the fast minimum viable product (MVP) method for experimentation may result in the loss of user funds. However, “testing in production” is a completely acceptable method, as long as the risks are transparent.

These limitations also leave more room for creativity to find excellent ways to improve the user experience and ensure sustainable growth. It is worth mentioning that if a project’s product/market cannot at least meet the DeFi market, then none of the actions described above will work. To expand, at least there must be something worth expanding. Let’s dive into some techniques and examples.


The biggest advantage of DeFi is of course its composability. This feature makes it possible to develop new solutions by using existing resources (infrastructure, data, liquidity), which are like Lego in terms of security and reliability. Building blocks. This is important because now the team can reduce protocol development and focus on its core business.

In addition, building in DeFi conforms to the lean startup concept, you can even deliver products within a single design and verify them directly through the market. This is of great significance, because previously, due to the complexity of decentralized protocols and the lack of users, you could not know whether the things you are building are valuable. The main reason for building products on Ethereum to gain more opportunities is network effects.

Protocol layer

The main task of the agreement is to be integrated by as many other decentralized application DApps as possible, so as to bring your agreement the best opportunity for exponential growth. The best examples are MakerDAO’s Dai, as well as Aave, Compound and Uniswap. Therefore, we can observe a clear correlation between the number of protocol integrations and the total locked value (TVL)/transaction value.

DeFi has a bubble, but organic growth also has a magic weaponMaker, Aave, and Compound rank among the top 7 TVLs in the DeFi field, and Uniswap ranks first in terms of transaction volume. Source: DeFi Pulse, Dune Analytics


The previous article refers more to B2B use cases, but for end users, there is an urgent need to access the DeFi protocol in a simple way. Zerion, Zapper, and Argent provide a better user experience to interact with dApps.

DeFi has a bubble, but organic growth also has a magic weaponMonthly visitors of Zerion and Zapper (based on data from the past three months) Source

DeFi has a bubble, but organic growth also has a magic weaponThe total number of new and accumulated daily Argent wallets. Source


Even if you are full of confidence in using DeFi, tracking the best quotes, lowest fees, and highest returns on various exchanges yourself is a very complicated task. The aggregator came into being:

  • Decentralized exchange DEX aggregator: 1inch, Paraswap, Totle,,
  • Income aggregator: Yearn, RAY, Rari Capital, Idle
  • Automated trading: DefiZap, Furucombo

However, the outside world has very different views on the relationship between aggregators and long-term operations:

DeFi has a bubble, but organic growth also has a magic weapon

Other main components

  • Infrastructure: Chainlink, IPFS
  • Data Lego: Dune Analytics, The Graph, Nansen
  • Comprehensive content processing: Defiprime, DefiPulse

The lightning loan, which is the icing on the cake on composability, can provide zero-collateral loans on the only condition-the borrower must repay in the same block, as if it never happened. You can also imagine that lightning loans can bring arbitrage opportunities that did not exist before, and more importantly, help test the agreement to see if the agreement can be implemented on a large scale.

user experience

User experience and scalability are the biggest challenges of decentralized protocols, preventing the large-scale adoption of these protocols. Ordinary users do not want to memorize the mnemonic words of encrypted wallets, and any operation may cost 5-20 US dollars or cannot guarantee that the funds are safe, which will bring a bad user experience.

The Argent team has made a breakthrough in this area. By implementing smart contract wallets and meta transactions, they have the opportunity to pay Gas fees on behalf of users. Another function is Guardian, which allows users to back up their wallets through social relationships, without using mnemonic words to open the wallet in non-custodial mode.

Dharma’s smart wallet also provides similar functions, allowing users to avoid mnemonics and gas handling fees.

Another example of dealing with gas costs is 1inch’s integration of CHI tokens and Loopring’s implementation of zkRollup. The Matcha project also uses meta-transaction and Gas fee tokens.

There is still huge room for user experience improvement in the DeFi field. In the DeFi user survey, what factors hinder the promotion of DeFi the most, and the respondents’ answers mainly centered on security and insurance. Encrypted native FDIC insurance products are closely related to lending products and applications, and are mainly for non-DeFi users.


Keeping up with the trend is nothing new or unique, but it is commendable to immediately implement the new features that the market needs, especially considering the complexity of setting up a test environment when dealing with various protocols. Responding quickly to market demand can bring about rapid user growth.

The highest honor in this area should belong to the Zapper team. With the emergence of income farming trends, Zapper is the first portfolio tracker to list all relevant new assets and liquidity. This allows DeFi users to monitor the complete product portfolio balance and effectively manage it.

DeFi has a bubble, but organic growth also has a magic weapon

Another great example of the team being able to add new features when highly relevant is 1inch. They added Uniswap v2 to their service just a few hours after it went live. They showed orders at the beginning of the IDO frenzy for the first decentralized exchange, and implemented Chi tokens that can save gas when the gas price soars.

DeFi has a bubble, but organic growth also has a magic weaponThe daily transaction value in 1inch USD. Source: Dune Analytics

The peak of income farming appeared in the release of the YAM agreement. The project was originally a social experiment, through fair governance token distribution, to achieve decentralized control of the project. In the absence of audits and SSL certificates, this agreement that took only 10 days to build locked up $500 million in TVL within 24 hours.

DeFi has a bubble, but organic growth also has a magic weaponYAM TVL. Source

Community ownership

The community is always the main building block of any open source project. However, only through the collaboration of DeFi and the decentralized organization DAO can it be possible to enhance community capabilities and economically encourage the community to actively participate in decision-making.

There are three components for a successful encryption project:

  • Find product/market fit
  • Distribute tokens to encourage community participation
  • Eventually realize the ownership of the project through tokenization is a typical example of the community promoting protocol development. why?

  • No pre-mining, no tokens held by the team and venture capital fund VC, and fair token distribution to early supporters
  • The community creates data dashboards, tools, discord and telegram chat
  • Actively participate in designated governance proposals
  • Endorsements of a large number of heavyweights in the DeFi community

DeFi has a bubble, but organic growth also has a magic weaponYearn community health. Source

Delivering one of them is considered a remarkable achievement. If your project has all of the above, then you are definitely doing the right thing.

What if a project has just started and cannot provide a high APY to motivate early users? With funding from the new DAO VC type fund, this is not a problem. Don’t hesitate to ask MolochDAO, Metacartel DAO/Ventures and LAO for help, they can help you with initial idea verification and community building.

On the other hand, you can also choose a fair release path to guide the deployment of a new encrypted network acquired, owned and managed by the community from the beginning.

to sum up

Liquidity mining is an excellent marketing program that can quickly guide liquidity or expand the capacity of projects that have realized products that fit the local market, but it cannot lack further sustainable growth.

The following is a guidebook on how to expand decentralized products in a way of organic growth:

  1. Make full use of composability. If a protocol is not composable and cannot add any value to the network, you may spend huge sums of money on recruiting users and developers, and ultimately still unable to make good progress.
  2. As they said, don’t go against market trends. The same is true for growth. Do you see the trend? Hold on.
  3. The small group of DeFi geeks does not care about user experience/interaction interface UX/UI unless the APY is very high. But then users who adopt the DeFi protocol force developers to care about the user experience and don’t make it painful for novice users.
  4. Put the project in the hands of a broad community, and the community will determine its development path. Fairly distribute governance tokens and encourage the community to participate in project development.

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