It seems that every week the Decentralized Finance (DeFi) sector is hit by news of a new rug pull. Tokens with anonymous teams behind them garner hundreds of thousands, even millions of dollars in market cap. Some buyers willingly ‘ape’ into a new project with the expectation of a manifold return on investment, even when the project is branded experimental. The potential for DeFi stretches much further than yield farming and mining.
The team behind iob.fi DAO believes that the advantages of DeFi over traditional finance are that it’s secure, robust, and permissionless. iob.fi DAO is a DAO-governed, non-custodial, hedged pool manager that offers both retail and institutional traders the opportunity to trade crypto, stocks, commodities, and indices under one roof using only a Web3 wallet and with no border or fiat currency limitations.
This is done through the Defy Hedged Pool that is managed by iob.fi DAO, and powered by the proprietary technology of ioBots. Its aim is to manage multi-class assets to achieve above-average returns and below-market risks. The Defy hedged pool is one of the first tokenized, actively-managed DeFi hedged pools in the world.
The two core technologies of iob.fi are Prodefy and ioBots. Prodefy is the means through which iob.fi DAO aims to bring DeFi to traditional financial establishments. It is the multi-financial protocols communication platform connecting FIX (Financial Information eXchange) protocol, Pillar, and other protocols to Web3-enabled decentralized finance (DeFi) and cryptocurrency trading.
Using these technologies, iob.fi DAO’s actively managed hedged pool fund had a return of 20% in the first three weeks (280% annualized) following its inception. This was in addition to the 28% APY staking rewards from holding FI tokens. FI tokens are governance tokens that are meant to be in demand for pool investors, especially institutional investors.
AMBCrypto sat down with the CEO of iob.fi Yale ReiSoleil, a veteran who has worked with mutual funds, venture capital firms, private equity, and hedge funds with high-frequency trading (HFT) in a professional career that began in 1996.
Q1. Hi Yale! Let me begin by asking, how would you explain iob.fi to a layman? How does it work?
Answer – We are one of the very few who actively manage a DeFi hedged pool. It is similar to a hedge fund, but we don’t call it a hedge fund, for reasons I will explain later on. It (the pooled funds) is on the DeFi platform, it’s on-chain, and the trading is done primarily on-chain. It is different from sending the order to a centralized exchange, that is a totally different type of interaction. The DeFi platform allows companies or platforms, including ourselves, to create any type of derivatives.
So long as there is a reliable price feed, it (DeFi) revolutionizes finance as we know it. Anyone with a Web3 wallet is able to invest or have exposure to, not just crypto but also stocks such as Tesla. Now you feel you want to invest in Tesla. Before, it was just hard. You have to find the stockbroker that’s able to get you access (to the stock exchanges). Now anybody in the world anywhere is able to access that derivative and take advantage of the price movements.
It democratizes market access. And that’s what we do, we don’t believe in passive investing. We believe, through our know-how and our risk-control engines, we can consistently beat the market. Just like we did for the past thirty years.
Q2. What is ioBots? What would its advice be to those who think there’s a “perfect trading strategy?”
Answer – ioBots is a collection of trading tools. (ioBots) gives us the opportunity to rewrite the trading algorithm (because it) was an accumulation of step-by-step, add-on type of evolution of a trading tool, which we call the decision engine. Because of the crypto on-chain nature, we re-wrote everything, from asset management to client management, trading decisions, risk management. We built it up together.
ioBots, until last month, was broadcasting live trading signals for free. We stopped them now. We will turn on some premium content later, for our own clients. Whoever owns our tokens only can access that information. But anyone can see our trading positions in real time on our website.
Based on market type, I’m going to trade it (using a) different strategy, risk management tools, and some other entry, holding, and exit strategies. Entry strategies only account for something like 30% of the importance (but) all the amateurs are talking about is, “What to buy?” “When to buy?”. But the person has missed 70% of the other important stuff.
That’s what (ioBots) is. ioBots is a proprietary trading (and) overall management tool that allows us to actively manage the funds which we call hedged pools.
Q3. Volatility is a crucial part of cryptocurrency trading and it also makes it incredibly difficult to remain profitable in the industry. How did iob.fi DAO’s actively managed Defy pool manage to yield a 28% staking reward, in addition to a return of over 20% (280% annualized) in the past three weeks?
Answer – First of all, we love volatility. Without volatility, there is not much trading. We are active traders (who) manage the fund, we are not investors in this pool. When trading funds, we are going in long (or) short. When the market is going sideways, we can’t make money.
So, 70% of the time the market moves sideways, 70% of the time we couldn’t do much. Only when it is going up, like the last few weeks, or back a few months ago in March that day, there was a drop. March 13 I believe, we made a lot of money.
This is the reason we want multi-classes. Very rarely is it that crypto goes up, stocks go up, they all go up and then down. But then in March, it did happen. We were not anticipating that, but we still did well. What’s most important to us is when there is a bear market or a big crash, we always do better than most other people. So it gives us stable growth and that’s the most important thing. What is the most important ingredient in trading? Consistency.
So we are confident that, 11 months from now, we can beat our objective of low double-digit returns with a minimum drawdown.
Q4. Why do you think has the gap between Wall Street and DeFi not been bridged yet? How are iob.fi and Prodefy helping out in this regard?
Answer – Blockchains, cryptos, especially DeFi are in their infancy. For Wall Street firms, not worth their time or effort to do this trading. There’s not enough liquidity. The infrastructure is not ready. The only thing Wall Street has been getting in recently, for more than a year now, is to try to build the Bitcoin ETF.
When I talk to them (other major entities in crypto) they don’t care about building a high-efficiency infrastructure. I ask, “How are you going to facilitate connection with a native FIX protocol?” which is a common high-performance trading protocol. And some of them told me they didn’t know what it was, or simply did not care. Engineers with very little experience in finance are acting as financiers. This explains why Wall Street is not in there.
The big boys are not interested, they are not going to build the infrastructure for the DeFi. The DeFi projects don’t understand (what is needed). We are the only one trying to build that bridge, for our own use at first. We might open up some level of the technology to be open-sourced so other firms can use this to build their trading systems on top of. That’s our roadmap’s first step, which we are already doing.
Q5. Institutional investors have always been at an advantage since they can afford to have multiple trading accounts around the world. How can iob.fi DAO help smaller retail investors play on a level field?
Answer – That is why we have iob.fi. Anyone with a Web3 wallet, like a Metamask wallet, can logock-in without KYC. That is also what makes Defy different from other liquidity pools. It is because we actively manage the pool. It is similar to a hedge fund, except that everything is on-chain, transparent.
Somebody in India, or China, wants to invest or to have exposure to Tesla, for instance, or Bitcoin. But, invest is the wrong word. They gamble. They don’t even trade, they gamble. Don’t gamble (with) your own money. Watch someone like us, watch how we do it, learn enough. And gradually you can learn (to trade).
Trading is the only profession anybody thinks they can do it. There’s a 50% chance that your very first trade makes money. You can not say the same thing for a brain surgeon. You don’t read a book and then operate on your own brain or heart. We want to change that. We give people information.
Q6. How is iob.fi DAO changing the perception that diversification is merely a means to reduce portfolio risk? How is the project’s Risk Engine contributing to that?
Answer – Diversification is not about investing 3% into this, 3% into that, not that kind of diversification. The people who do this, call it a means of reducing risk. We don’t buy that. It is lazy, it is incompetent.
Diversification means trading different markets that are not correlated. When Bitcoin is doing nothing, remember 60-70% of the time the market is going sideways, gold, crude oil or stock can go up or down. We have the opportunity to look into other markets that are moving.
That is what I call opportunity diversification. Not weight-based diversification, which is lazy and can also be disastrous. So, it doesn’t matter what we are trading, we always know our max drawdown.
The upside takes care of itself. What matters most is the downside. Portfolio risk is the third consideration of the whole trading process. One, objective. Two, market type. Three, risk level. Before the decision engine makes any decision, risk must be calculated independently by the risk engine.
The risk engine monitors this while the position is open, independently, and on a continuous basis. Non-stop. Measure this position’s pre-determined risk level and whether it is within the (acceptable) level. If the position’s own risk size goes beyond the maximum allowed, it will exit the position.
And then, it will send that data to analyze how we can do better. It (the risk engine) is what allows me to sleep at night, knowing we will not go bankrupt.
Q7. How do you envision iob.fi’s roadmap to evolve, especially since many projects in the industry have been badly hit by the COVID-19 pandemic?
Answer – We absolutely will evolve, along with the maturity of the whole DeFi sector and the infrastructure we are helping to build (to facilitate) trade in the sector. DeFi trading doesn’t exist, that’s why they call them “swaps.” We are committed to building and making some contribution, for our own use as well as to help the industry.
Three years from now, I believe trading on DeFi will be so different, I cannot even imagine. It will be very, very efficient. The beauty of decentralization is that no (individual) is truly needed, but collectively we are making this (DeFi sector) better and better at astonishing speed. Three years ago, I could not envision that DeFi would enable us to have a self-custodian business model. Today, we are here.
Three years from now, how much Wall Street money can get into the sector? Hopefully, partially through our Prodefy platform, I don’t know but it will happen I think.
I have traded quantitatively for 15 years, and I can only speak based on data. I can not answer the latter part of the question because, simply, I lack the data. I don’t know how many projects are doomed to failure due to misfortune or simply don’t deserve to exist.
For more information, visit iob.fi’s website.
Disclaimer: This is a paid post and should not be taken as news/advice