WonderFi Technologies Inc WNDR, a platform providing the masses exposure to a finance model that replicates market-making, borrowing, lending and exchanging without expensive institutional middlemen, begins trading on the Neo Exchange on Tuesday, Aug. 31.
As part of the development, Benzinga spoke with WonderFi co-founder and CEO Ben Samaroo, as well as early backer Kevin O’Leary.
What Is DeFi: Decentralized finance — colloquially referred to as DeFi — has the potential to disrupt finance. Why? Blockchain alone, as well as bitcoin, lacks a utility component.
With the introduction of Ethereum, a decentralized open-source platform, developers introduced utility-like aspects, such as insurance and data providence, through smart contracts, which are basically coded escrow agreements.
Over decentralized exchanges (DEXs), or protocols written in code on top of the Ethereum network, market participants can lend, borrow and swap these smart contracts amongst each other.
DEXs work around traditional problems surrounding economies of scale, cutting out institutional intermediaries such as banks. For posting liquidity participants earn trading revenue or yield.
Why WonderFi: DEXs weren’t made with the masses in mind.
That’s according to Samaroo — a securities lawyer turned crypto-pioneer — who is developing a blockchain-based gateway to this new financial ecosystem. WonderFi’s focus is on a holistic experience as mass adoption and education often start with a simple interface.
The goal, ultimately, is to make finance open to all.
“A lot has changed since the early days of cryptocurrency,” Samaroo explained in a discussion on his team having a unique perspective, given experiences building Galaxy Digital-acquired First Coin. “DeFi is the next best thing as it changes the way we think about the financial system.”
Cryptocurrency did a great job of exposing the masses and regulators, for that matter, to DeFi’s potential in resolving a lot of social issues that flow into finance.
“The current financial system doesn't provide equal opportunities for people, whether it's people from lower socioeconomic rungs, women, or visible minorities,” Samaroo said. “It's all rooted in how the financial system is opaque and tightly controlled.”
Core Product: O’Leary, whose current deal flow consists mostly of projects in emerging markets like DeFi, said that a clear change in regulatory leeway inspired his involvement.
“If you’re being compliant internally and also with regulators in each jurisdiction you operate in, you don’t have the option to be off-sides," O’Leary said in a discussion on global authorities opening up markets to crypto products and services. “When the facts change, I change.”
O’Leary wanted to solve a problem; after generating a lot of cash from real-estate divestments, he looked for ways to earn yield before redeployment. That’s when he began writing short-duration contracts on products like USDC, garnering yields sometimes as high as 5%.
The process to do that wasn’t easy; there’s no infrastructure for compliance like in the currency, bond or stock market. That means institutions running billion-dollar mandates for sovereign funds, for instance, can’t get the mark-to-market reporting necessary for regulatory compliance.
“It took me four months to set up all my compliant infrastructure with FTX,” an institutional-grade cryptocurrency exchange O’Leary proudly endorses. “FTX has the largest infrastructure and best compliant platform an institution's … internal compliance department can work with and external auditors can audit.”
Given his perception of opportunity in the space, the celebrity investor teamed up with ventures like NFT.com, led by Jordan Fried, and WonderFi — which changed its name from DeFi Ventures Inc, a play on Richard Branson’s Virgin branding. O’Leary believes he and WonderFi can solve the problem of making a complaint DeFi infrastructure available for the masses.
“The potential is massive and we’re going to cut fees,” he said. “I want to be a part of it.”
Samaroo added a comment on nearly 11% of New Yorkers — like many living in developing countries or areas with high inflation — not having a checking or savings account.
“The space is fragmented and complicated … so I think there’s a ton of obstacles to get involved,” Samaroo said.
WonderFi’s mission is to bring DeFi technology to the masses — through a curated app experience — so people can buy assets, earn interest, and get broad exposure to the space via index-type products.
“It’s also about being able to track your performance and be compliant from a tax perspective.”
Vision For Future: "We often see a drop-off,” Samaroo said in reference to complexity being a barrier to adoption. “Our thesis is that an app like WonderFi will help us get past the early adopter stage."
In increasing adoption, WonderFi partnered with investors O’Leary, FTX CEO Sam Bankman-Fried and Josh Richards, a TikTok influencer and entrepreneur, on exposure initiatives.
“Josh never got any education on personal finance in school,” Samaroo said. “He feels like he has a duty to help his following be able to think critically about their money.”
Going forward, the WonderFi team is looking to get past recent froth in the market — a result of big booms in any industry — and hone in on access and utility.
“I think there’s also a need for collaboration and integration with DeFi platforms like ours." Samaroo said. "That is part of our corporate strategy to help move this space forward.”
Photo: courtesy of WonderFi. Left, Kevin O’Leary. Right, Ben Samaroo.
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