Bril Finance pioneers a new era of yield optimization in Web3

Author: Christos Makridis

Yield optimization has emerged as a key opportunity area ripe for transformation in the rapidly evolving decentralized finance (DeFi) landscape. As blockchain technology matures, companies like Bril Finance are leading the way by developing sophisticated, transparent, and trusted models to maximize returns for investors. It provides a more pleasant user experience, similar to the dashboards you see in legacy products other than Web3. . Their thinking on financial product design, from quantitative modeling to user interfaces, provides a useful template for others in the field of emerging technology.

The rise of decentralized finance

According to my research in the Journal of Corporate Finance, DeFi is fueled by airdrops and the creative use of governance tokens, and will grow from “approximately 90,000 users in early 2020 to 4.28 million by the end of 2021.” We saw an initial explosion of activity. As the sector expanded, the search for high yields on tokens resulted in a “wild west” and a lack of reliable products.

Many projects promised high yields but failed to materialize. These low-quality products lacked transparency, often leaving investors in the dark about how their funds were being utilized. For example, the yield farming platform brings astronomical returns but was unsustainable due to flawed tokenomic schemes. Investors flock to them, only to see their investments collapse when the protocols can no longer maintain the yields they promise. Other developers launch projects, collect liquidity, and then disappear with investors’ money. This is also called a “rag pull.” These patterns made yield farming risky and unpredictable.

For example, YAM Finance initially gained attention for its unique flexible supply model aimed at maintaining stable value. However, a serious bug in the rebase mechanism caused the value to suddenly plummet, wiping out investors’ funds. His YAM, the project’s governance token, became worthless overnight. According to CoinDesk, “YAM’s total value plummeted from approximately $60 million at 07:40 UTC to $0 just 35 minutes later at 08:15 UTC, according to data from pricing site CoinGecko.”

HotdogSwap is an offshoot of SushiSwap, another yield farming platform. Despite its humorous branding, HotdogSwap failed to gain traction due to a lack of innovation and community interest. Investors who participated in the original liquidity pool suffered losses. Pickle Finance aimed to optimize yield by automatically switching between different stablecoin pools. Despite initial interest, a series of smart contract vulnerabilities resulted in significant financial losses. These projects and many others exemplify the combined trust and tokenomics gap in the DeFi space.

However, these challenges are not unique to the DeFi space. Centralized exchanges also allow wash trading, “as seen in other financial markets, where investors buy and sell the same asset at the same time, creating artificial trades that distort prices and undermine investor confidence and participation.” struggling to cope with the spread of A recent study published in Management Science led by Lin William Kong, a professor at Cornell University and director of the FinTech Initiative, documents the ubiquity of wash deals.

A new approach to multi-chain yield

However, the industry has evolved, with increasing emphasis on transparency, security and sustainable growth to foster trust among investors. As seen in companies like Wealthfront and Robinhood, the expansion of artificial intelligence and nascent technologies in the traditional financial services sector has led to a greater democratization of powerful new tools at the disposal of retail consumers. Similarly, major changes are occurring. On Web3.

Founded in 2022 with the aim of helping both highly sophisticated and more novice traders deploy their funds efficiently, Bril Finance has shown impressive annual returns on the BNB chain. We will soon be launching an integrated UX that will allow users to access native yields from liquidity offerings in over 22 deployments across her 16+ chains. Bril is a seamless yet sophisticated decentralized finance (DeFi) tool that proactively optimizes and manages portfolio strategies in a secure and non-custodial manner.

The dApp allows users to deposit their tokens in a single asset vault, giving everyone access to professional tools that deliver higher yields and risk-adjusted returns based on automated liquidity strategies. You will be able to do it. Bril leverages an underlying liquidity-providing algorithm that performs category-defining automatic rebalancing to achieve high capital efficiency. When users deposit tokens into a single asset vault, they receive LP tokens representing a share of the liquidity pool. A single asset vault eliminates the complexity of managing multiple assets within a liquidity pool. Bril deploys entrusted assets in a centralized liquidity AMM across the blockchain ecosystem via leading cross-chain bridge partners. Positions are automatically adjusted based on market conditions, and users can deposit and withdraw their earnings at any time.

“Bril is designed to respond to rapid market changes by making necessary rebalancing adjustments in real time in a way never before seen in this space,” said CEO Connor O’Shea. explained. “Bril monitors the difference between fast (5 minutes) TWAP and slow (60 minutes) TWAP. [time-weighted average price] The same is true between spot prices and fast TWAP. Based on the price difference, situations of high volatility (depending on the pool, but typically set at 6% difference) and extreme volatility (typically set at 25% difference) are recognized. . During periods of high volatility, users’ positions are spread across the price range, limiting large selloffs of preferred tokens due to price changes. In extreme volatility situations, your safe will be locked and no further deposits can be made. “At this time, our strategy team is assessing market conditions before making any rebalancing decisions,” he added.

The financial services sector relies heavily on forecasting expected returns and losses, determining how to allocate capital while managing idiosyncratic systemic risks. Bril Finance builds on the approach taken in traditional finance by building better models to predict returns and, just as importantly, actively monitoring returns. I am. “I think people would be surprised to learn how much real-time human elements are involved in risk management across the global financial system, whether it’s Web2 or Web3,” O’Shea said. “The fact is that good technology is extremely important, and we have it. But here we always need highly qualified people to play key roles on the front lines. We’ve been very transparent about this, and our team is committed to using what I think is great technology, fresh approaches, and overall less negative traditional banking baggage. , we’re proud to bring together both best practices and expertise gained from serious TradFi experience.”

Bril leverages blockchain technology in two important ways. First, because transactions are performed on-chain, the data is rich, transparent, and readily accessible. Second, there is less room for human error and malicious behavior. Although there are still individuals who can execute trades and build models, performance is publicly accessible, providing inherent checks and balances. “Risk management is fundamentally different in Web 3 because there is no government bailing anyone out,” O’Shea says. “We take that reality very seriously, as everyone should, and it’s reflected throughout our approach to that side of the business.”

institutional genealogy

Bril Finance’s founding team has both strong traditional finance and institutional pedigree in addition to the necessary crypto-native expertise. O’Shea spent years advising some of the world’s largest banks as they looked to scale up their own private blockchains before making a full-time commitment to DeFi. At Binance and BnB Chain, he led corporate development efforts and forged strategic partnerships for Web3 and Web2. Prior to joining Binance, he was based in New York where he supported corporate strategy and deal closing with JPMorgan Chase & Co. At WPP Kantar, he developed advertising and marketing strategies for fintech, luxury goods and CPG clients. Prior to joining WPP, he was a corporate strategist in Strategy&’s New York, Tokyo and London offices, specializing in financial services growth and his M&A. Mr. Connor dropped out of high school during his freshman year and founded CCKV, a San Francisco-based payments startup.

“We are solving a problem for people who are heavier traders and are looking for a way to trade without actively investing capital. We are turning the exchange into a liquidity provider. Connect and thereby return revenue to users. Capital providers not only want their holdings to increase in value, but also to leverage their capital. We can’t control the supply, but we can help you get the best returns. The majority of platforms don’t have sustainable APYs and ultimately rely on algorithms. Create your own yield products It’s very difficult to build, so in the same way that JPMorgan has its own team chasing yield, we’re attuned to the new money coming into Web3 and making sure our users connect seamlessly. We can help you realize this kind of potential.” shared.

O’Shea and his team believe that revenue optimization in web3 has already come a long way thanks to the recent and greater convergence of principles from both the tradFi and DeFi worlds. As blockchain investing matures, optimizing yield no longer needs to feel like a gamble, but rather a strategic move with full-fledged products and companies that offer much greater transparency, trust, and single accountability. It will be a great opportunity.