DeFi Comes to Bitcoin Cash: John Nieri Claims First Real Decentralized Finance Protocol on Bitcoin

TL;DR: Decentralized finance (DeFi) is all the rage, and typically associated with Ethereum. Developer and entrepreneur John Nieri, known online as emergent_reasons, launched a new project, General Protocols. Their first offering is an attempt to seize the DeFi moment, bringing to Bitcoin Cash a synthetic derivative they “created to mitigate the stability problem using the incentives of speculation.”  

DeFi Comes to Bitcoin Cash

“We are a new company using Bitcoin Cash to create products and utility for the world,” came the post on read.cash. “In the near future we will release our first product, AnyHedge, as it launches in cooperation with Cryptophyl’s new non-custodial exchange, Detoken.”

AnyHedge is to be Bitcoin Cash native, a “trustless stability solution” to address “a volatility problem that holds back adoption.” The plan appears to be something called a “synthetic derivative” contract to lessen price fluctuations by way hedging, shorting, and use of an oracle (which they admit involves a bit of trust). Only the first two employ BCH coins proper, and the three in combination act “much like a subset of traditional futures and forward contracts,” with the hedge pegging to an “external asset” as the short, of course, “amplifies the risk and reward,” General Protocol explained.

The derivative is set as “an open source smart contract,” and will include libraries and a whitepaper “exchanges, OTC desks and anyone else can use.” The company earns its keep by making such arrangements easier, handing “all the complexity around creating, monitoring and upgrading contracts with no need for new infrastructure or knowledge” for a small fee.

Interview with John Nieri of General Protocols

CoinSpice caught up with John Nieri, President of General Protocols, to ask about the company, its products, team (a couple of whom are from a popular project, Flipstarter) and what they hope to accomplish.

CoinSpice: What was the inspiration behind General Protocols?

John Nieri: Make money, move the needle on BCH adoption, make an example for other projects in BCH space to up their game.

AnyHedge seems to be targeting volatility. Some believe that to be a feature, not a bug. 

Not that I disagree. Volatility is probably the universal response from regular merchants and people who are not in a position to take on large volatility with their financial lifeblood. In other words, Bitcoin uses speculation to achieve a greater goal but it doesn’t mean every user has the ability to handle large volatility. We have to cater to everyone, not *only* speculators.

You chose to work with Crytophyl, a relatively new exchange, and their even newer platform, Detoken. Why?

This technology needs to be proven with a player that is as innovative as we are. Cryptophyl is perfect and has a long term vision that fits perfectly with AnyHedge. Once we prove it with the friendly and aligned inner circle, we will expand into other niches in crypto and then beyond into traditional finance products.

The know-your-customer (KYC) section of AnyHedge is really interesting. How is that different from more Ethereum-based DeFi concepts?

This is a killer property of AnyHedge that ETH DeFi does not (in many cases cannot) provide. Most of the interesting things in ETH DeFi are big shared contracts with automated mechanisms. So when you go to make a trade, you don’t have a choice as to which random Calvin Ayre will be on the other side of your trade. This is impossible for most current companies to work with – they have to know who they are trading with. You could argue that you are trading with ‘the system’ but according to what we have heard, that is not acceptable.

You claim this is the “first real decentralized finance protocol on any branch of Bitcoin.” You sure? 

It’s hard to assert a negative, but we haven’t seen one. We have seen some really bad ones. Everybody has a nice introduction and good intentions. But when you look under the hood, the ones we have seen are garbage. Also, CDSV covenants are very new and not possible on other bitcoin chains.

Looks like you’ve brought along some of the Flipstarter team. Any connection? 

No. They are completely separate. A little back story is necessary. We were working hard on the business. Very hard. Then we heard [of the Infrastructure Funding Plan for Bitcoin Cash (IFP)] and thought nobody would take it seriously. But then some people did. And [lead BCH implementation Bitcoin ABC] implemented it. So as soon as we realized some people were taking it seriously, we were in a crisis. Our business depends on BCH being alive and healthy and awesome. IFP takes all of that away, from our perspective. So we put everything on hold, a very painful thing to do, and decided to do everything we could to keep BCH alive, again from our perspective.

Flipstarter was one of the things we decided was within our power to do, so we set out to do it as a volunteer activity, completely separate from the company. The main code contributors are Jonathan, Dagur, Sploit, Me, Leandro and others. So max 50% from General Protocols.

What is a synthetic derivative?

We use it a little loosely. It’s a big meaning if you read about them. You can do all kinds of formulas, rules, etc. It’s like the idea of a programmable contract so it fits well with smart contracts. Ours is something like the most simple synthetic derivative possible.

The main point for us to call it synthetic is that we have a specific rule set and there is no interaction with the asset itself.

Bitcoin Cash

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DISCLOSURE: The author holds cryptocurrency as part of his financial portfolio, including BCH.