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Meet DeFi 2.0 ft. Timeswap

By Superteam

Published on 2022-06-02

Discover how Timeswap is transforming DeFi with its innovative oracle-less lending and borrowing protocol, offering a new paradigm for decentralized finance.

The notes below are AI generated and may not be 100% accurate. Watch the video to be sure!

Introduction to Timeswap

Timeswap is a groundbreaking DeFi protocol that aims to revolutionize the lending and borrowing landscape in the cryptocurrency space. Founded by a team of passionate developers and finance experts, Timeswap introduces a novel approach to decentralized finance by creating an oracle-less lending and borrowing platform. This innovative protocol addresses some of the most pressing issues in the current DeFi ecosystem, particularly the reliance on external price oracles and the associated risks.

The Timeswap team, consisting of Ricsson (also known as TimelordEth), Harshita, and Amit, brings together a diverse set of skills and experiences to tackle the challenges of building a truly decentralized and efficient lending and borrowing platform. Their journey from ideation to launch has been marked by rigorous testing, multiple iterations, and a commitment to creating a secure and user-friendly protocol.

The Concept Behind Timeswap

At its core, Timeswap can be understood as a way to swap tokens through time. As Ricsson explains:

"You can swap tokens in the present time, right? That's what's happening in Timeswap. You're essentially swapping tokens through time. So you can swap your tokens from the present to the future or from the future to the present."

This concept forms the basis of Timeswap's lending and borrowing mechanism. When a user lends tokens, they are effectively moving their assets to the future, while borrowing involves bringing future assets to the present. This unique perspective on financial transactions allows Timeswap to create a more flexible and efficient market for crypto assets.

The Three Pillars of Timeswap

Timeswap's design is built upon three fundamental characteristics that set it apart from traditional DeFi lending platforms:

  1. Permissionless: Anyone can create a market to lend and borrow any ERC20 token without requiring permission from token holders or governance systems.

  2. Generalized: The protocol works for any pair of ERC20 tokens, without special parameters for specific assets.

  3. Oracle-less: Timeswap does not rely on external price oracles, eliminating a major security risk present in many existing DeFi protocols.

These pillars form the foundation of Timeswap's innovative approach to DeFi, addressing key issues that have plagued other platforms in the space.

The Problem with Existing DeFi Lending Platforms

Traditional DeFi lending platforms like Aave and Compound have been instrumental in the growth of the decentralized finance ecosystem. However, they come with inherent limitations and risks that Timeswap aims to address.

Amit explains one of the key issues with existing platforms:

"In Aave, all the assets are pulled into one liquidity pool together. So it's essentially if you add a weak asset into all of these pools, essentially all the other assets are taking on the risk of this low quality asset."

This pooled liquidity model necessitates careful curation of assets and introduces centralization through governance decisions on which assets to include. Additionally, these platforms rely heavily on oracles for price feeds, which can be manipulated, leading to potential exploits and loss of funds.

The Oracle Problem in DeFi

One of the most significant innovations of Timeswap is its oracle-less design. Oracles, which provide external data to smart contracts, have been a source of vulnerability in many DeFi protocols. Ricsson elaborates on this issue:

"The problem I have with Oracle is though, it's not a game theoretically sound design. Now what do I mean by that? Because whenever there's a large enough hotspot and if the Oracle is weak enough, then it creates strong incentives for attackers to manipulate the price of the Oracle one way or another."

This vulnerability has led to numerous hacks and exploits in the DeFi space, with billions of dollars lost due to oracle manipulation. By eliminating the need for oracles, Timeswap removes this attack vector entirely, creating a more secure environment for users.

How Timeswap Works

Timeswap's oracle-less design relies on market dynamics to determine interest rates and collateral requirements. As Ricsson explains:

"The price which is the interest rate and the collateral requirement is handled through a free market. So whenever people lend the interest rate and the collateral requirement goes down and whenever people borrow, both of those information goes up."

This market-driven approach allows for more efficient pricing and risk assessment, as the protocol adapts to real-time supply and demand dynamics. It also enables Timeswap to support a wider range of assets without the need for centralized governance decisions.

The Journey to Building Timeswap

The development of Timeswap has been a lengthy and challenging process. As Ricsson recounts:

"I went through so many notebooks of ideas where okay I think of a new idea write it down see if it will work but the gas cost be good enough. You know things like that I went through so many notebooks with it and when I met with Harshita and Amit that was that was roughly a year and a half."

The team has gone through multiple iterations, extensive testing, and numerous audits to ensure the security and efficiency of the protocol. This meticulous approach has been crucial in creating a robust and reliable platform in the high-stakes world of DeFi.

Timeswap's Unique Value Proposition

One of the most exciting aspects of Timeswap is its potential to enable new forms of capital formation in the crypto space. Ricsson introduces the concept of Initial Debt Financing Offering (IDFO):

"The idea here is that because Timeswap is lending and borrowing now you if you have a new project you need some funds right number of your you could create the tokens representing you and or maybe you could have your own native token or whatever that is now some of it you are going to sell right because you need the initial funds to start your project up right that's called equity financing right but now because of Timeswap you cannot create a pool wherein you could use your native token as collateral to borrow whatever you know assets you need."

This innovation could potentially revolutionize how crypto projects raise capital, providing more flexibility and options for both projects and investors.

Timeswap's Market-Driven Approach

One of the key advantages of Timeswap's design is its ability to adapt to market conditions in real-time. Amit provides an example of how this works in practice:

"Currently you could actually borrow from Timeswap like I think I had posted we had posted it we had yesterday where you could borrow up to like 10,000 USDC by depositing MATIC with as little as 120% collateral and like interest rate of like 0.5% that's basically because the market is currently bullish and they believe the value of MATIC is going up in the next few days."

This dynamic pricing model allows for more efficient capital allocation and better reflects the true market sentiment and risk assessment of different assets.

Challenges and Skepticism

As with any innovative project, Timeswap has faced its share of skepticism and challenges. Harshita recalls the initial reactions to the concept:

"I think the most common thing I would say is like people found it hard to wrap their head around the Oracle-less thing. I think I don't know if you guys are following like over the last few months the trend of Oracle-less has been slowly coming to the market so there is another protocol called Primitil which is also trying to build an Oracle-less or a derivative system so like like a year and a half back when we were in the market initially introducing this idea like nobody could nobody believed that it is possible for a money market to exist without Oracle."

Overcoming this skepticism has been a crucial part of Timeswap's journey, requiring extensive education and demonstration of the protocol's capabilities.

The Future of DeFi and Timeswap's Role

As the DeFi landscape continues to evolve, Timeswap is well-positioned to play a significant role in shaping its future. Amit shares his vision for the future of DeFi:

"I think fundamentally the way I look at the DeFi market right now is I think we had that first stage of evolution where you had like some foundational products like Uniswap, Aave, Compound and Curve that was built out and they became the foundational pillars on which now you have attracted significant amounts of capital but bulk of this capital is crypto native capital there's not fresh capital that's coming into the system."

Timeswap aims to be part of the next wave of DeFi innovation, potentially attracting new capital and users to the ecosystem through its novel approach and enhanced security features.

Cross-Chain Ambitions

While currently deployed on Polygon, Timeswap has ambitions to expand to other blockchain networks. Amit explains:

"I think it's very clear the market has signaled that that the future is like a multi-chain ecosystem obviously it could be which version of multi chain nobody can be sure but it's pretty clear that it's going to be a multi-chain future so yeah for sure we also have plans to launch in other chains that will it all depends on like what is the market demand."

This multi-chain strategy could help Timeswap reach a wider audience and integrate with various ecosystems across the blockchain space.

Advice for Indian Founders in Crypto

Given their experience as Indian founders in the crypto space, the Timeswap team offers valuable advice for others looking to enter the industry. Amit emphasizes the importance of understanding the unique dynamics of the crypto world:

"I think common mistake I think what we have seen people make is like a lot of people are like uh moving into Web3 after the reason like hype in the last six to eight months right so they are coming into Web3 crypto with a lot of mental models that they've learned from the Web2 world right but fundamentally nothing that work in Web2 actually works in Web3 it's a completely different paradigm it's a completely different ballgame."

This insight highlights the need for founders to immerse themselves in the crypto ecosystem and understand its unique characteristics before attempting to build products or services.

The Importance of Community and Social Media in Crypto

One of the key lessons shared by the Timeswap team is the critical role of community engagement and social media presence in the crypto space. Amit notes:

"Unless you are on Twitter 24/7 you don't get this industry like this whole industry runs on Twitter honestly."

This observation underscores the importance of active participation in online communities and discussions for anyone looking to succeed in the crypto industry.

The Role of Memes and Entertainment in Crypto Marketing

Interestingly, Timeswap has embraced an unconventional marketing approach through the creation of a "Timeswap Intern" Twitter account. Amit explains the strategy behind this:

"So like I think around I think it was around DeFi somewhere around that time like a lot of projects started to have these interns like they would create this secondary alt account which is like project name intern and they would just shitpost all day like they won't do anything else."

This approach has proven effective in attracting attention and engaging with the community in a fun and relatable way.

The Potential for Timeswap in Gaming and NFTs

Looking to the future, the Timeswap team sees potential for integration with other emerging areas of the crypto space, such as gaming and NFTs. Amit envisions:

"I can imagine an MMORPG game where there's a bank and it's actually Timeswap behind it people don't know."

This kind of integration could help bring DeFi functionality to new audiences and use cases, further expanding the reach and impact of the protocol.

The Importance of Thorough Testing and Auditing

One of the key lessons from Timeswap's development process is the critical importance of thorough testing and auditing, especially for innovative protocols. Harshita explains:

"So we were actually in testing from like October 2021 till like March like it was like a six-month window where we ran multiple incentivized test nets where users were incentivized to like play like the product is actually on mainnet and if they operated well they could actually earn money also."

This commitment to rigorous testing has been crucial in ensuring the security and reliability of the Timeswap protocol.

The Regulatory Landscape for Crypto Founders

The Timeswap team also touches on the regulatory challenges faced by crypto founders, particularly in India. The trend of founders moving to more crypto-friendly jurisdictions like Dubai is noted, with Harshita explaining:

"It's all about the regulations like obviously I think it's not that nobody wants to pay tax it's about like having some clarity around regulation okay if we are building something what are the you know how are we going to be regulated what are the ways."

This highlights the ongoing regulatory uncertainty in many jurisdictions and the impact it has on the development of the crypto industry.

The Convergence of DeFi, NFTs, and Gaming

Looking to the future of the crypto space, Amit sees a trend towards convergence of different sectors:

"Another thing which I'm saying is like the intermingling of DeFi NFTs gaming DAOs and all of this just intermingling too like instead of like each of these in silos like DeFi had its time then you had the NFT summer then there is a bit of DAOs thing going on right now and a lot of gaming stuff also happened all of this was like in silos but you can now see all of these converging together."

This trend could lead to more integrated and complex crypto ecosystems, potentially creating new opportunities for protocols like Timeswap.

The Importance of Understanding Game Theory and Economics

Ricsson emphasizes the importance of foundational knowledge in game theory and economics for anyone looking to succeed in the crypto space:

"Study game theory and Austrian economics that makes me that's the Bitcoin game theory Austrian economics that will give you the foundation to understand which is a good protocol to try to work on because if you don't understand those two shit you're walking in a dark."

This advice underscores the interdisciplinary nature of crypto and the importance of understanding the underlying principles that drive the technology and its applications.

The Role of Timeswap in Democratizing Finance

One of the most exciting aspects of Timeswap is its potential to democratize access to financial services. By removing barriers to entry and enabling anyone to create lending and borrowing markets for any asset pair, Timeswap could potentially open up new opportunities for individuals and projects that have been traditionally underserved by the financial system.

The Technical Challenges of Building an Oracle-less Protocol

While the concept of an oracle-less lending and borrowing protocol may seem simple on the surface, the technical challenges involved in bringing this idea to life have been significant. Harshita explains:

"If you look at the white paper it's like pretty very much detailed and there are a lot of formulas and equations that goes behind this equation right that how do you decide the minting of the tokens to all the user profiles which is lenders, borrowers and LPs and while you're minting it how do you ensure that it's stable for all the three set of user profiles."

This complexity underscores the innovation behind Timeswap and the depth of thought that has gone into its design.

The Potential Impact of Timeswap on DeFi Adoption

By addressing some of the key security concerns and limitations of existing DeFi protocols, Timeswap has the potential to accelerate the adoption of decentralized finance. The removal of oracle-related risks and the ability to support a wider range of assets could make DeFi more accessible and appealing to a broader audience, potentially bringing in new users and capital to the ecosystem.

The Role of Community in Protocol Development

Throughout the discussion, it becomes clear that community engagement has played a crucial role in the development of Timeswap. From incentivized testnets to active social media engagement, the team has prioritized community involvement at every stage. This approach not only helps in refining the protocol but also in building a loyal user base that understands and believes in the project's vision.

The Importance of User Experience in DeFi

While much of the discussion focuses on the technical aspects of Timeswap, the team also recognizes the importance of user experience in driving adoption. Amit notes:

"I think one important trend is definitely like you are now seeing a Web2 kind of UIs which are extremely simple that is coming on top of DeFi so I think a lot of protocols are trying this."

This focus on improving user experience could be key in bridging the gap between DeFi and traditional finance users.

The Potential for Timeswap in Emerging Markets

Given the team's background and insights into the Indian crypto scene, it's worth considering the potential impact of Timeswap in emerging markets. The ability to create lending and borrowing markets for any asset pair could be particularly valuable in regions with less developed financial infrastructure, potentially enabling new forms of economic activity and financial inclusion.

The Role of Education in DeFi Adoption

Throughout the discussion, the importance of education in driving DeFi adoption becomes clear. From explaining complex concepts to overcoming initial skepticism, the Timeswap team has had to invest significant effort in educating users, investors, and the broader crypto community about their innovative approach. This highlights the ongoing need for clear, accessible education about DeFi concepts and protocols.

The Future of Decentralized Governance in DeFi

While not explicitly discussed in the podcast, the permissionless nature of Timeswap raises interesting questions about the future of governance in DeFi protocols. By removing the need for centralized decision-making about supported assets and risk parameters, Timeswap potentially offers a more decentralized model of protocol governance.

The Potential for Timeswap in Traditional Finance

While the focus of the discussion is primarily on the crypto and DeFi space, it's worth considering the potential applications of Timeswap's technology in traditional finance. The ability to create efficient, market-driven lending and borrowing markets without reliance on centralized price feeds could potentially disrupt various aspects of the traditional financial system.

The Role of Timeswap in Fostering Innovation

By providing a flexible, permissionless platform for lending and borrowing, Timeswap has the potential to foster innovation in the crypto space. The ability for anyone to create markets for any asset pair could enable new types of financial products and services that were previously impractical or impossible to implement.

Conclusion

Timeswap represents a significant innovation in the DeFi space, addressing key limitations of existing protocols and potentially opening up new possibilities for decentralized finance. By eliminating the need for oracles and enabling permissionless creation of lending and borrowing markets, Timeswap could play a crucial role in the next phase of DeFi evolution. As the protocol continues to develop and expand to new chains, it will be exciting to see how it impacts the broader crypto ecosystem and potentially transforms the landscape of decentralized finance.

Facts + Figures

  • Timeswap is an oracle-less lending and borrowing protocol for DeFi.
  • The protocol allows users to swap tokens through time, effectively lending or borrowing assets.
  • Timeswap is built on three key pillars: permissionless operation, generalized functionality for any ERC20 token pair, and oracle-less design.
  • The team spent over a year developing and refining the protocol before launch.
  • Timeswap conducted extensive testing, including a six-month window of incentivized testnets.
  • The protocol is currently live on the Polygon network.
  • Timeswap allows borrowing with as little as 120% collateral in some cases, compared to higher requirements on other platforms.
  • The team hired half of their staff through the Superteam job board.
  • Timeswap's development was inspired by the limitations and vulnerabilities of existing DeFi lending platforms like Aave and Compound.
  • The protocol aims to enable new forms of capital raising, such as Initial Debt Financing Offerings (IDFOs).
  • Timeswap plans to expand to other blockchain networks in the future.
  • The team emphasizes the importance of understanding game theory and Austrian economics for success in the crypto space.
  • The protocol's design eliminates the risk of oracle manipulation hacks, which have resulted in billions of dollars of losses in other DeFi protocols.
  • Timeswap uses a unique "intern" Twitter account for marketing and community engagement.
  • The team sees potential for integration with gaming and NFT projects in the future.

Questions Answered

What is Timeswap?

Timeswap is an innovative DeFi protocol that enables oracle-less lending and borrowing of crypto assets. It allows users to "swap tokens through time" by lending their assets to the future or borrowing from the future, all without relying on external price oracles. This design addresses key security and efficiency issues present in many existing DeFi lending platforms.

How does Timeswap differ from traditional DeFi lending platforms?

Timeswap differs from traditional DeFi lending platforms in three key ways. First, it's permissionless, allowing anyone to create markets for any ERC20 token pair without requiring approval. Second, it's generalized, working for any token pair without special parameters. Finally, and most importantly, it's oracle-less, eliminating the reliance on external price feeds that have been a source of vulnerability in other protocols.

What are the advantages of an oracle-less design?

An oracle-less design offers several advantages. It eliminates the risk of oracle manipulation attacks, which have resulted in billions of dollars of losses in other DeFi protocols. It also allows for more efficient and market-driven pricing of assets and risk. Additionally, it enables the protocol to support a wider range of assets without the need for centralized governance decisions on which assets to include.

How does Timeswap determine interest rates and collateral requirements?

Timeswap uses a market-driven approach to determine interest rates and collateral requirements. As more people lend, the interest rates and collateral requirements decrease. Conversely, as more people borrow, these parameters increase. This dynamic pricing model allows the protocol to adjust in real-time to market conditions and demand for different assets.

What is an Initial Debt Financing Offering (IDFO)?

An Initial Debt Financing Offering (IDFO) is a new concept enabled by Timeswap. It allows projects to use their native tokens as collateral to borrow other assets, providing an alternative or complement to traditional equity fundraising. This could potentially revolutionize how crypto projects raise capital, offering more flexibility for both projects and investors.

How has Timeswap addressed the challenges of building a novel DeFi protocol?

Timeswap has addressed the challenges of building a novel DeFi protocol through extensive research, multiple iterations of the design, and rigorous testing. The team spent over a year developing the protocol, including a six-month period of incentivized testnets. They've also undergone multiple audits to ensure the security and efficiency of the protocol.

What are Timeswap's plans for the future?

Timeswap plans to expand to other blockchain networks beyond Polygon, aiming to become a multi-chain protocol. The team also sees potential for integration with gaming and NFT projects. They're focused on improving user experience and potentially enabling new forms of financial products and services through their permissionless, oracle-less design.

What advice does the Timeswap team have for founders entering the crypto space?

The Timeswap team advises founders entering the crypto space to immerse themselves in the ecosystem and understand its unique dynamics. They emphasize the importance of being active on social media, particularly Twitter, and warn against trying to apply Web2 mental models to Web3. They also recommend studying game theory and Austrian economics to gain a foundational understanding of the principles driving the crypto space.

How does Timeswap approach marketing and community engagement?

Timeswap has taken an innovative approach to marketing and community engagement, including the creation of a "Timeswap Intern" Twitter account that posts memes and engages with the community in a fun, relatable way. The team emphasizes the importance of education and clear communication to help users and investors understand their novel approach to DeFi.

What potential impact could Timeswap have on the broader DeFi ecosystem?

Timeswap has the potential to significantly impact the DeFi ecosystem by addressing key limitations and security risks of existing protocols. By enabling permissionless creation of lending and borrowing markets for any asset pair, it could foster innovation and potentially attract new users and capital to the DeFi space. It may also influence the design of future DeFi protocols, particularly in terms of oracle-less architectures and market-driven risk assessment.

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