Embedded DeFi, What Crypto dApps can learn from PayPal

Remember how eBay Originally worked? Probably not.

Usually our brains don’t remember ugly and horrible things.

Once upon a time, when you won an online auction, you would write a check, address an envelope, and mail it to the seller. 3–5 business days later, the seller would (hopefully) receive the check, and take it to the bank to be cashed. Once the check cleared, the seller would ship the goods to the buyer.

Entirely trust-based and reliant on good citizenship.

Naturally, early eBay was riddled with scams and fraud.

Sound familiar?

eBay almost fizzled out and died. Many, many times. But thanks to one itty bitty partnership, eBay could finally scale.

Enter PayPal.

PayPal had the best fraud prevention in the industry. And, best of all, you didn’t have to leave the website (let alone your house) to pay someone.

Ebay had a large addressable market with a User Experience Nightmare.

PayPal + Ebay

The combination of the two created a verticalized ecommerce Monster that dominated early commerce on the internet. Their success helped grow massive adoption and many of the first transactions on the internet.

User experience and PayPal

PayPal was one of the first embedded fintech integrations. This allowed for a smoother user experience. A positive user experience reduces friction and increases the velocity of money.

Web3 Friction

Right now web3 is standing in the same place that eBay was 20 years ago. What’s still missing is nearly the same — a solution that streamlines the user journey from awareness to intention to commitment.

Today in DeFi, you have fewer options than CeFi with a barrage of restrictive parameters. At the most basic level, to send money from one wallet to another, you have to take several factors into account such as the blockchain, the network type, the token standard, gas, etc.

If a single factor doesn’t align with the rest, the payment doesn’t go through or worse.

It gets more complicated when you try to operate multichain through bridges or try advanced trades like options or margins.

In layman’s terms, the user experience doesn’t fit the user’s expectations. What we need is a system that not only simplifies the user experience but also reaches beyond user expectations.

This is why we need Embedded DeFi.

What is Embedded DeFi?

Embedded DeFi is an experience where all the required actions to accomplish a task are on the same page.

Embedded Defi is a streamlined experience advancing the adoption of wide spread Defi.

Everything necessary to get the task done is available without leaving the dApp. This streamlines the user’s experience while moving the complexity and required actions behind the scenes.

Embedded DeFi opens up the possibility for users to have an intuitive user experience without needing to open up another platform to get something done.

By making those unnecessary steps disappear, you can increase the velocity of money.

Increasing the velocity of money saves everyone time.

Also, if velocity increases, (holding supply constant) either your token price will go up, or you’ll sell more goods and services.

We’re fine with either.

{MV = PQ. Supply of Money * Velocity of Money = Price * Quantity}

The Benefits of Embedded DeFi

Revenue Opportunities

With Embedded DeFi, protocols have more revenue streams. Charging fees, providing different service packages, etc. Cashflow increases cash-bearing assets. Embedded DeFi puts tokens onto balance sheets. More revenue makes for a more sustainable business, and sustainability is moral.

Web3 B2B

With Embedded DeFi, protocols force clear and identifiable markets.

Businesses can tell exactly who their customers are. This leads to a more efficient prospect build-up.

As mentioned before, with a replicable model, platforms can scale and invest in business development and other necessary growing mechanisms.

Once you have sales teams, more deals get done, and more people can make more money.

Originally only devs could play the game.

Embedded DeFi grows the pie. Embedded DeFi lowers the barrier to entry. Embedded DeFi Increase Token Optionality.

Token Optionality

Embedded DeFi increases optionality through upsells to both users and the community at large.

Token optionality is a combination of utility and accessibility for a specific token.

If crypto was so extremely easy to use over cash everywhere globally crypto adoption expands.

Your token has to be readily accessible to users and other businesses to use. When one token is much easier to use, even in the context of crypto, that puts your token far ahead of the rest of the group. Some people even say pricing NFT’s in ETH cause the last ETH bull.

Embedded DeFi Platforms — Live Use cases

Bridges

The original inspiration from this article first came last year around the launch of DefiKingdoms CrystalVale. Everytime before the CrystalVale bridging experience I had to leave the dApp and open another tab to bridge my assets to another chain. This was suboptimal confusing and frightening with depending on the amounts I was sending to different chain. Synapse Protocol and DefiKingdoms partnered together for what I saw as a real breakthrough in DeFi. It was simple and fast.

What really blew my mind is that there was a premium to be paid on the interface as opposed to transacting directly with synapse. At AlphaGrowth we are big fans of Synapse and the pushes they are making in this space to really ease the user experience for all users involved.

Aggregators & Dashboards

Zapper.fi-My first experience with a dashboard aggregator was Zapper.fi. A way to track your wallets and NFTs across multiple chains, they added the ability to transact and bridge right with in the main dashboard.

Aurora plus- is aiming to centralize the gas expense and push the payments onto dapp developers. An Example Scenario: you’ve developed a game but for your users to play the game they will need to create a wallet, buy crypto, and then transact it.

This level of friction will cause players to drop out.

But what if the platform paid it on behalf of the user directly on the app?

This definitely reduces friction.

Just like servers, CDNs, and cloud storage, all of them are paid for by the platform and they include the whole thing at a single price.

I met with Matt Henderson from Aurora Plus to see what his take behind the interface:

UX was a tremendous focus. Before Joining aurora I was a Defi user and saw all the issues.

When we built the rainbow bridge we learned a million little UX optimizations and spent months learning.

Someone who has no exposure to blockchain can get on ramped with easy access.

We put everything in dollar terms so it’s easy for the user.

Looking to make Aurora Plus a dashboard in which everything on Aurora can be accomplished in a single dashboard.

we are building a framework of design primitives so anyone on Aurora can integrate with a consistent User experience across all dapps and products.

Citadel One- DeFi is a messy experience. Especially in the Cosmos ecosystem. With an estimated 100 Cosmos app chains in 2023, everything is scattered all over the place.

Citadel one of the largest validators in the game are bringing everything together and eliminate unnecessary steps. Multiple chains, multiple staking opportunities, on ramps and off ramps.

On Ramps

It took almost a year to implement the first payment gateways to purchase bitcoin and most of those got banned as soon as it was understood.

Now Kado.money is here as an on ramp which a developer can embed into their frontend interface in minutes. Gone is the days and weeks to receive your first tokens.

Another on ramp is transak.com which is popping up all over the internet with a way to quickly and easily purchase token as seen live and embedded in the Aurora Plus interface.

The Obstacles to Embedded DeFi

Security

With more access to more services the surface area to secure grows. A challenge in security models is always access vs. security. Embedded DeFi will have similar challenge. Where ever centralization streamlined flows come together a new attack vector emerges.

Spam & Bots

“We spent a Large effort fighting bots early on.” — Matt Henderson

The beauty of crypto is that integrating bots and pushing spam becomes very expensive running on chain transactions. The amount of fraud and bots in web2 are very costly to the entire ecosystem which is mostly stopped with gas fees in on chain transactions.

Partnerships

The Crypto industry has a very homesteading feel to it. Protocols and dApps want to be entirely self sufficient which leads to lack of velocity from the business side of crypto. More partnerships exponentially increase learning which will push the entire industry forward.

Conclusion

In the future we will see a giant opportunity in Embedded Defi: Isolated money markets, Infinite perpetuals, fNFTs(financial NFTs), staking as a service, stable coins as a service the opportunities are wide and readily available.

This is a new category and we’re really excited about it. If you are building Embedded DeFi, we want to meet you. Come build together with us and we can help scale crypto together. Create or connect a profile, apply for a grant: https://alphagrowth.io/grants

If you’re an investor that is interested in Embedded DeFi, we want to meet you too.

Everyone talks about bigger better faster fiat ramps. Guys with enough embedded defi, we don’t need fiat ramps. Forget those guys. Here comes Embedded DeFi.

If you’re interested in learning about more crypto grants and growth for your project, we encourage you to connect on Twitter @bryancolligan. Or join Our Telegram: https://t.me/+eJH_vQwWKSBiYjdh