Recap: VALK x Colony Lab AMA on Telegram
VALK’s co-founders, Antoine Loth and Elie Azzi, were invited by Colony Lab, a community-driven Avalanche ecosystem accelerator that took VALK as their first incubated project, to speak about the project storry and upcoming Merlin release with Colony Lab’s community. Here is the recap of the AMA.
Q1: Can you briefly introduce yourselves, tell more about your past experiences and how started working on VALK?
Antoine: I am the co-founder & CEO of VALK
Elie: I am the co-founder and Head of Product at VALK
Antoine: We come from slightly different professional backgrounds. I came from the Finance industry — Private Equity and Investment Banking. Elie has a background in Technology being an early Blockchain Architect of BNP Paribas.
We both had various questions and issues about the industries that we worked in. I didn’t understand why finance, particularly private markets, wasn’t going digital, while Elie wanted to apply his knowledge and experience gained in tech and blockchain to build his own products.
We met in 2018 through a mutual friend and founded VALK already by 2019. Since then we have been continuously thriving to transform the capital markets and constantly bringing innovative ideas to make DeFi better.
Q2: This is brilliant! It’s great to have team members from different backgrounds who are driven by the same vision!
We would love to know more about VALK’s project story and how did the rest of the team come together to build this DeFi portfolio management system?
Antoine: We both saw a significant need to digitise the financial ecosystem, and so we developed a tokenization solution for private capital markets back in 2019. Since then, it has grown to host 100+ clients among regulated financial institutions and support $5B+ in deals value.
However, we realised that the real growth, adoption and opportunity lie in DeFi, which we saw growing exponentially during 2020.
In early 2021, we developed our multi-phase plan to bring DeFi to everyone from newbies to institutional asset managers and to bridge TradFi and DeFi. Initially, we were focusing on building institutional-grade DeFi products for clients using our tokenization platform, but we realised the entire market needed high-quality portfolio management solutions to fully benefit from DeFi.
Hence, we came up with our multi-phase plan:
- Merlin product: allowing investors to have an overview and deep understanding of their DeFi positions across multiple protocols, calculating yield, net profit and loss, NAV and much more. All in one dashboard.
- VALK DeFi aggregator: a platform from which investors can access and trade on different protocols without switching anywhere else. These trades include both simple transactions such as lending, borrowing and withdrawal, as well as complex ones including flash loans, arbitrage and leverage boost.
- Combining both products to allow automated strategies, comparison between strategies, back-testing and yield optimisation.
Q3: Amazing! And let’s face it, modern DeFi is not exactly easy to navigate and use, especially when it comes to tracking positions across multiple applications. The solution that VALK is bringing is here to tackle everyday issues that retail DeFi users can face.
When designing VALK, what problems of modern DeFi users did you take into account?
Elie: We knew that DeFi couldn’t reach mass adoption among both everyday investors and traditional asset managers unless portfolio management was simple and understandable. Yet, there are few products out there that allow investors to view their portfolio on a single dashboard, compare their positions and understand the success of their DeFi activities relative to the yield, PNL and other measurements. As we came from delivering high-quality TradFi solutions to asset managers and fund managers, we knew how to deliver products that address even the high expectations of portfolio management professionals.
Currently, when investing in DeFi protocols, a user finds it hard to track any profit or loss they made compared to their initial investment. Platforms like Aave only show the net worth of the user’s portfolio or a breakdown per currency, while the displayed value is equivalent to their aToken. As for Compound when supplying a currency cToken is received by the user and its price increases with each new block. However, when the investment is made into a token, instead of a stablecoin, 2 variables come into play: the yield received in the invested token and the token’s price compared to USD.
For example when a user deposits 1 ETH into a lending protocol, with the ETH price at $3000 and yield at 1%. After a year the user should have an equivalent of 1.01 ETH. however, if the price of ETH decreases to $2500 the total would show as a gain in ETH, but a loss in USD., which is the real measurement of success
Our goal is to build useful products that will last on the market because of the value user drives from them. That is why it is important for us to both provide investors with the necessary information they need about their own trades in a simple and understandable dashboard, and at the same time give them the right tools to make informed and calculated decisions about their future trading strategies.
Q4: I couldn’t agree more. The current platforms have a lot of limits and don’t have any deep analytics options! That’s exactly why we are interested in VALK’s solution, Merlin.
Building a portfolio management tool isn’t an easy task! How long did it take the team to build the product? How difficult was it to bring various smart contracts together to build such a complex DeFi portfolio management system under one development umbrella?
Elie: We started building Merlin 9 months ago. Straight away we had lots of work such as indexing data and querying smart contracts across major protocols on the blockchain.
We were using a combination of Etherscan, Graph and our know-how internal models to fetch all the information related to one’s wallet’s interactions and trades. But the more protocols we integrated with, the easier it was to index important data and add our calculation engine.
For instance, once we integrated Compound into Merlin, Sushiswap was a lot easier since some of the modules could be forked. Our upcoming integration with Trader Joe is another example. Each new indexation makes Merlin stronger and more powerful!
Q5: Exciting! I believe the beta-testing of your star product, Merlin, is already live? We are super excited for its launch in the coming weeks!
Can you give more details about this DeFi smart wallet that provides a comprehensive analysis of all transactions in one’s wallet?
Elie: We called our DeFi smart wallet Merlin as it is able to read and understand absolutely all the information related to an investor’s wallet address, whether it is Metamask, Coinbase or any other wallet. It can:
1. Distinguish between assets held inside the wallet and assets being lent/borrowed on major protocols such as Aave, Compound, Trader Joe and others
2. Provide institutional-grade reporting and accounting in one single place.
3. Provide an overview of all transactions, recent and historical
4. Calculate total profitability of yield earned vs NAV. Merlin is able to track the date at which the investor deposited the staked tokens, the price at that point, the yield earned during that time period and the current price of the token in question. This way, it can calculate whether there has been a profit or loss related to that staking action.
5. Show aggregate transaction fees, which is particularly important when gas fees are volatile.
6. Signal impermanent loss on liquidity pools such as Uniswap, as well as the range and the ratio of the tokens within the liquidity pool to see if the investment is profitable or not. Additionally, Merlin will allow investors to claim any fees that they have earned from liquidity provision very soon.
7. Merlin provides analysis of all transactions and investments, showing investors historical values of APYs and pool behaviour, as well as the comparison between them.
8. Merlin’s data provision means that strategies can be back-tested to allow future optimisation of investment returns versus other strategies. Different strategies can be compared over time, allowing full coverage and providing an opportunity to plan and optimize for future investment strategies.
Q6: Inventive! I guess this makes Merlin actually the first wallet to provide historical transactions with deep analytics options, right?
Let’s compare it to some other solutions to have a better understanding of Merlin’s added value. Taking Zapper and Debank as Merlin’s competitors, they only take the investors’ current positions but do not provide yield calculations and other features. How did Merlin manage to go beyond this?
Antoine: Essentially the difference between Merlin and Zapper or Debank is that Merlin provides more dynamic data and deeper analytics. Meaning that Merlin compares current positions versus past performance. Whether that is through a chart determining the change in the wallet’s net worth in the last 6 months, total yield generated from Aave or LPs that have been most successful on Uniswap.
We want to provide a product that delivers to investors the same level of analytics and usefulness that fund administrators deliver to their clients in the TradFi space. Easy and understandable reporting of key performance metrics such as net asset value, profit vs loss of certain investments, and yield optimisation strategies, are all integral parts of Merlin’s functionality. Merlin’s users, whether retail or institutional, have the best analytics to make informed decisions about their DeFi trades & investments.
Q7: Sounds great! How accurate is Merlin’s historical data analysis?
Elie: 99.9% ! Merlin does not lie.
Our indexing system takes data directly from the DeFi protocols. Merlin makes queries and pulls the data that is verified and validated on-chain, and only then delivers it to the platform where users see the data in an understandable way. Such data as the price of ETH exactly 24hrs ago, or the total yield earned in a Maker vault since last week according to the current APYs can only come from the blockchain and protocols living on the blockchain.
Q8: Merlin can’t lie. Love this!
How long did the beta-testing stage last for Merlin? What were the most challenging aspects throughout the building phase? How did you overcome these roadblocks?
Antoine: Merlin has been in various types of beta. The first version was out early this year. However, this was very private and mainly used internally to check for bugs and UI issues. The other main issues we saw were:
- Understanding different DeFi strategies by end-users
- Implementing the correct way of PNL calculation
Through trial and error, feedback from early users together with 1000s of iterations from our fantastic product team, we have streamlined all the processes and are almost ready to launch.
Last week we have opened beta mode to more users, although this isn’t 100% public yet. These include over 600 users who have previously registered on a website and 40+ institutions (DeFi funds, asset managers etc.). Our aim is to launch Merlin in May.
Q10: Will there be a mobile app for Merlin? It will be really great to have access to the platform from your phone, when you are away from your computer.
Antoine: Yes! We believe that an app is a very convenient way to use Merlin. We understand that our users live busy lives and want to see how their DeFi positions are doing even when they are on the go. Especially if they just need to check something quickly. Look at Blockfolio (now FTX) which
was a hugely successful product, and many users were using it from their smartphones.
Merlin aims to be your go-to portfolio management tool. That is why our mobile app will be deployed soon after the desktop version launch.
Q11: What solutions does Merlin wallet provide to make the life of DeFi investors easier?
Antoine: First of all, we made sure to provide you with the most accurate data for a transparent and complete view of your trading and investment performance across multiple protocols. Secondly, we aim to help you make smarter trading decisions with automated strategies. The goal here is to set you up with the best strategy to increase profits while lowering the fees and reducing the execution risk. Stay tuned for more news about both😉
Q12: Merlin smart DeFi wallet has some features that sound really cool such as aggregate transaction fees & impermanent loss signalling. Does that mean users can track their gas fees and impermanent loss of their liquidity pools? Can you explain these features in more details?
Antoine: Yes, exactly! You will be able to do both with the help of Merlin.
Also, Merlin gives users a breakdown of their positions (like liquidity in a LP) and transactions, meaning different actions done in that liquidity pool.
For example, you want to deposit ETH in a lending pool on AAVE. Imagine, on day 1 you deposit 1 ETH, on day 2 you deposit 3 ETH and on day 3 you withdraw 2 ETH. Merlin recognises that the deposit of the first day is not generating yield anymore and only 1/3 of the second deposit is generating yield via its built-in accounting mechanism (FIFO). The same logic can be applied to a liquidity pool.
Q13: So this is it from us. Any last words you’d like to tell to Colony community?
Antoine: The final note from us is an invitation to Merlin beta-testing.
If you would like to register and apply to become Merlin’s beta-tester now or to be prioritised on the list as an early user, fill out the form below: