Intro

What Do a “Half 🐉 Man with a Pitchfork,” Darkpony, and 🦄 Uniswap Have in Common?

It was early May 2009, when the user “darkpony” posted [original grammar and syntax preserved] “I like drawing pictures. and then i color them too. so i thought i would suggest something for me to draw and then if someone wants me to draw it then they can put in some pennies and then I'll draw it. and color it.” [Darkpony] This post became the first successful campaign on a crowdfunding website called Kickstarter [Strickler]. As of November 2020, over 5 billion US dollars had been pledged to projects on this platform [Statista].

On May 24, 2009, several weeks after the darkpony, [apopheniacs, get ready!] Satoshi Nakamoto, or whoever this is, published a white paper [Nakamoto]. We all know this paper quite well now. Two years passed, and in February 2011, a young Canadian immigrant of Russian origin, Vitalik Buterin, heard the word “Bitcoin” for the first time. He wrote, “articles for some guy’s Bitcoin blog” [Moynihan] at 5 BTC each. Five Teslas per blog story is quite a reasonable writing retainer. However, back then, it was $5 (at least US, not Canadian) per article [Simon].

Vitalik’s talent grew far beyond writing articles. Fast-forward five years, he launched Ethereum [Tual] in July 2015, authoring Ethereum’s white paper sometime before that [Buterin]. While Bitcoin revolutionized digital currency and decentralized money, Ethereum created smart contracts for digital commerce.

DeFi (pronounced similar to 🔊HiFi) is one of the use cases for Ethereum and other specialized blockchains that came afterward, the most prominent being Polkadot and Cardano [Perkmann]. DeFi is heavily hyped [Richter] and… this is great. As of the time of drafting this paper (Autumn 2021), the “total value locked” (a controversial [Dale] yet handy metric, which is a rough fiat equivalent of “total assets”) of the DeFi ecosystem is over 90 billion US dollars, according to DeFi Pulse.

That’s still a trivial amount when compared to the traditional banking system. The total amount of fiat deposits in a mid-sized European economy, such as Austria, as of March 2021, was over [numerologists, get ready!] 555 billion US dollars [CEIC Data]. However, DeFi’s current 80 billion is not trivial at all when compared to Kickstarter’s all-time (that’s over a decade) 5 billion US dollars, while having an equivalent hype level and its miracles and failures [Liu]. This fact ultimately brings us back to Kickstarter… for DeFi.

In November 2018, Hayden Adams launched Uniswap (according to... himself) [Adams]. Uniswap is a decent example of brilliant entrepreneurship. But, of course, it is not the first DEX out there, EtherDelta and Bancor being earlier pioneers. Nor did Uniswap invent the “x*y=k market makers” on Ethereum; Alan Lu did that back in 2017 [Lu] — the fact which Mr. Adams so gracefully admits. Still, what Uniswap skillfully did, was seizing a business opportunity that simply presented itself. Early DEXes, in particular, sucked at security [Schroeder], [Hamilton] while the established centralized exchanges (Coinbase, Binance, Kraken, etc.) sucked at liquidity [Capponi].

In this paper, we explain which business opportunities we saw in the market niche for DeFi launchpads back in Autumn 2020, how we decided to seize them and which technology we use (ok, the latter with limitations imposed by our patent attorney). We hope you will enjoy taking this journey together with us. Have a great day!