Missing decentralized financial services (DEFI) at Near Protocol Inc.

Abstract

The NEAR Protocol is a blockchain company founded by Alex Skidanov and Illia with its key product being the top infrastructure for layer 1 blockchains. However, in 2022, NEAR faced two significant issues that causes many seriously consequences to NEAR ’s performance: a decline in the NEAR token price (-20,000%) and a decrease in the Total Lock Value (TVL). Despite a mini uptrend in the crypto market and the recovery of other layer 1 blockchains in early 2023, NEAR's growth did not meet expectations. This thesis aims to identify and address the underlying problems and propose solutions to facilitate NEAR Protocol's sustainable growth. Through interviews and extensive research, the study ideified 5 potential problems: the persisting bear market, bad tokenomics, infeasible vesting plan, the emergence of new rival blockchains, and the missing DeFi Dapps within the NEAR ecosystem. Among these, the missing DeFi Dapps is identified as the main problem, considering its strong influence, significance, and contribution to the symptoms experienced by NEAR Protocol. Importantly, it was determined that this issue could be resolved within a short timeframe and with a feasible budget. The potential causes of the main problem are explored, and three key factors were identified: the lack of a stable coin circulation, the lack of partnerships with multichain DeFi platforms such as Lido, AAVE, and Curve Finance and the failure in managing DeFi dapps effectively. The study concludes that the failure of DeFi dapp management is the root cause of the main problem, as it strongly influences and contributes to the overall issue. To address the root cause, three potential solutions were evaluated: outsourcing missing DeFi dapps, acquiring existing DeFi dapps in the market, and implementing missing DeFi dapps using an in-house team. Ultimately, the implementation of missing DeFi dapps by the inhouse team was chosen as the most suitable solution, considering optimized cost, good security, easy maintenance and scalability. This aligns with NEAR Protocol's business thesis and investment thesis. The selected solution involves implementing a missing DeFi dapp called NEARLEND, specifically a lending dapp, which is crucial in the DeFi ecosystem and accounts for 10% of the Total Lock Value (TVL) in the global DeFi market. The estimated timeline for implementing NEARLEND is six months, with a budget of approximately $200,000. The Agile method and Scrum framework will be employed for effective schedule and resource management throughout the project. The objective of this new project is to enable NEAR Protocol to achieve sustainable growth by addressing the identified gaps in its DeFi offerings.