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DEX Discontents: Automation May Finally Deliver a Good User Experience for Retail Traders
Decentralized exchanges (DEXs) that have snubbed the average retail investor may soon suffer from FOMO. To attract more users to decentralized finance (DeFi), the DeFi market is quickly moving towards a low-cost model. Institutional and large investors currently dominate platforms with expensive fees like Uniswap 2.0 because retail investors are more sensitive to transaction costs.
As DeFi dApps launch on lower-cost blockchains, the influence of the retail investor is felt as the market shifts to the cheaper blockchains. In the six months leading to December 2021, Ethereum’s market share dropped 10.8% to 62.4%. The biggest gainers were the lowest cost blockchains BSC, Polygon, Avalanche, and Solana.
But low cost does not mean a trade-off in performance. These blockchains also meet or beat the performance benchmarks of the soon-to-be-launched Ethereum 2.0 with the scalability, speed, and interoperability to support the rapid growth of decentralized financial services.
These cost and performance improvements are accelerating the transition of the retail investor into decentralized finance, but there is still one major obstacle to broader adoption. Although low-cost blockchains open the door to permissionless financial services for everyone, the average person finds DeFi platforms too challenging to use.
As DeFi users struggle with the UX interface on basic swap platforms, developers face the challenge of delivering a seamless user experience in a future widely expected to be about composable and cross-chain decentralized financial services on Web 3.0.
DeFi’s UX Pain Points
Most developers think DeFi users just compare APYs when searching for a DeFi platform, but the yield is not the most important factor investors consider when choosing a DeFi platform. On popular lending and borrowing platforms, the UI/UX is a more important determining factor, according to a DeFi User Survey supported by leading DeFi platforms, including UniSwap and Maker.
With so many successful trading apps in the market, it may seem hard to understand why DeFi has struggled to develop a user experience that satisfies its users. This could be partly explained by technical professionals making up 43% of decentralized finance users. For the average trader, though, DeFi dApps are complex and not at all intuitive.
A major issue with UX experiences, in general, is a siloed UX approach, according to the Gartner report Drive Seamless Digital Customer Experiences with Composable UX. Siloed services are an even bigger issue on DeFi dApps launching new products and services daily. New services are not only coming from in-house development and a plethora of partnership deals but also the many bridges being built between blockchains. Whereas many blockchains are first and foremost concerned about building bridges to Ethereum’s vibrant DeFi community, the Harmony blockchain is connected to over 13 different blockchains!
Harmony operates a trustless BTC network bridge, as well as the native Horizon Ethereum and Binance Smart Chain bridges. Additionally, through partners like Multichain, Synapse Protocol, oPortal, and more, Harmony is connected to over 13 blockchains. It’s often said that the future of DeFi is multichain, and Harmony is well-positioned to lead in an interconnected Web 3.0, where users can take advantage of more complex cross-chain trading, lending, and other products.
Unfortunately, with the unprecedented rate of development and convergence of cross-chain and composable DeFi products, developers engrossed in creating new interoperable financial products often treat the UX experience as an afterthought. For DeFi mass adoption to take place, the UX must flexibly adapt to the continuous innovation of DeFi products pushed forward at an unprecedented rate by an open-source development community gaga over the interconnectedness of Web 3.0.
This apt analogy from the Gartner report fits well:
“We spend a lot of time designing the bridge, but not enough time thinking about the people who are crossing it.” — says Dr. Prabhjot Singh, Director of Systems Design at the Earth Institute.
UX design aims to develop products with empathy toward the end-user in mind.
Advanced DeFi with a seamless user experience — The Hermes Protocol
Hermes DeFi was created by a group of experienced DeFi users with a singular goal in mind: to create a Safe, Transparent, and Fast platform that is easy for everyone to use. Hermes has set out to meet the demand for UX simplicity without sacrificing DeFi features while building a complete suite of DeFi services on one platform. The Hermes testnet went live May 14th, so traders can now see for themselves if Hermes has succeeded in architecting a better DeFi DApp without compromising on features.
Digital asset investors equate simplicity with a novice app like a robo-advisor with a handful of automated portfolio investment choices. Investopedia has voted robo-advisor Wealthfront Best Automated Investing App. Hermes has set out to prove that we don’t need to compromise. Although the Hermes trading interface is both new user and experienced trader friendly, the Hermes roadmap offers a powerful DeFi suite with advanced trading tools, analytics, Dual Farms, Bonding, and more.
Like your favorite robo, through a simple interface, users can easily find all the yield-earning services listed across the top of the main page in one click: Swaps, Liquidity, Farming, Staking, and a one-click liquidity migrator. Sixty percent of Hermes’ 30 million tokens have been allocated to farming rewards. Additionally, users will be able to participate in Dual Farms, Bonding, and HRMS staking to earn in a variety of different ways.
With robust multi-chain support from the Harmony blockchain, Hermes is quickly signing up partners for their Dual Farm Program. The first will be Cosmic Universe, an Unreal Engine 5 Fantasy MMORPG built on the Harmony blockchain. As a fast, sharded Layer 1 blockchain with thousands of nodes delivering 2-second transaction times and instant finality at 100x lower fees, Harmony provides DeFi dApps the potential to provide top market performance.
DeFi automations that increase yield
Automated strategies are a good way around a complex UX, and in this respect, Hermes is making good use of automation, starting with seamless communication. One of its most useful upcoming features is push notifications, a crucial trading tool not natively supported by Ethereum. In a market in which more traders use Twitter and other social media channels than technical analysis for market and pricing intelligence, real-time push notifications on trading limits, margin calls, and so on are sent to Twitter and Telegram.
Through their collaboration with the Ethereum Push Notification Service (EPNS), Hermes will push DeFi notifications in real-time to help users attain a trading edge. EPNS users can even have push notifications sent to their ENS domain name, like a personal email. Users can opt-in to receive notifications through their mobile phones (iOS & Android) or on their desktop through a browser extension.
Other yield-enhancing automations include:
Automatic Protocol Fee Redistribution — Through the HRMS staking derivatives sHRMS and xHRMS, users are able to earn USDC or HRMS (respectively) acquired from protocol revenue. This process is handled entirely automatically, with rewards distributed every hour. Additionally, xHRMS can be single-staked to earn partner tokens sourced from Dual Farms.
Auto-compounding Liquid Staking of ONE — Hermes staked ONE (hONE) is a new liquid staking token that represents validator-staked ONE, helping to make it easier and more profitable than ever to secure the Harmony network. Rewards from staking are automatically compounded by this smart contract, increasing APY. Additionally, Hermes has worked with Harmoforce (a community of decentralists on Harmony) to design a round-robin delegation strategy that helps elect new validators, further increasing the decentralization and security of the network. Additionally, hONE can be used in place of ONE for DeFi applications, meaning you can earn validator staking rewards in addition to other DeFi yields.
Auto-compounding farms (Vaults) — Liquidity Providers on Hermes earn 85% of swap fees. Even better, the HRMS rewards from all Hermes farms are “unlocked” so farmers can immediately benefit from automatically compounded earnings. Hermes is working with one of their partners from Polygon, KogeCoin, to implement auto-compounding vaults for all of their farms. This means users will be able to optimize their rewards without having to constantly claim and restake farming rewards.
Diverse DeFi applications within the same platform
Bonding — Besides staking and farming, bonding on Hermes is another way to earn HRMS rewards. Bonding is Hermes’ primary strategy for building protocol-owned liquidity. This enables a stable liquidity base and decreases trading price impact. The Hermes Protocol sells HRMS at a discount for a bond (15 or 30 days redemption) in exchange for “blue-chip” assets such as ONE and USDC. In the future, Hermes will actively invest protocol-owned liquidity to diversify assets and boost revenue.
Liquidity Migrator and Zapper — To help new users come to Hermes, the liquidity migration tool can interact with any Uniswap V2-based DEX to migrate liquidity onto Hermes in a single click. Our first migrator will be for HRMS/ONE from ViperSwap. Additionally, the Zapper is an easy way to convert a single token (ie, ONE) into a staked farming position. This contract handles swapping assets, pairing them together, and staking them in Hermes farms in a single click.
Bridge Aggregator — Because Harmony is so well connected to other blockchains, finding the best bridging route can be challenging. Hermes is developing a Bridge Aggregator that finds the best route for moving your assets to or from Harmony. Stay tuned for this exciting feature in Q3.
Other advanced features include order book visualizations, limit orders, FIAT onramp integration, tax report generation, personalized portfolio analytics, and trade history reports. All of these features will have the same seamless frontend experience you can expect from Hermes DeFi. Stay up to date with Hermes DeFi on social media, and join the Hermes Discord to get started in their community.