According to DeFiPulse, decentralized finance developed into a $92 billion business in 2021, measured by total locked value (TVL). To put that in perspective, TVL was valued at $24 billion in December 2020, representing an almost 300 percent increase, which cannot go unnoticed. DeFi has grown into an ecosystem of over 534 crypto applications that provide financial services such as lending, borrowing and asset management in less than three years.
According to PitchBook data, private investors in Silicon Valley backed 72 decentralized finance businesses in 2021, more than a quarter more than in 2020. DeFi will definitely play a significant part in the financial industry’s future.
The United States is the most important market for DeFi goods at the moment. In contrast, Europe is catching up. Furthermore, UK startups are forming a rising section of the creative business, alongside their European counterparts.
How does a DeFi product function?
The ultimate goal of DeFi is to eliminate the need for intermediaries in traditional financial services like lending, trading, investing, payment, insurance, etc.
The following are a few of the most common forms of decentralized finance applications:
- Platforms for stakes
- Liquidity mining platforms
- Exchanges that are not centralized (DEX)
- Apps and Protocols for Decentralized Lending
- Non-custodial wallets are those that aren’t kept in a bank.
- Non-traditional products-based markets
Decentralized finance solutions are effectively modular due to the way they are created, which means that applications and protocols can be added to and mixed. This gives you much more flexibility and variety in terms of the services you can provide and the benefits of blockchain technology.
Do you have any plans to create a DeFi product?
You’re likely to have several queries if you have a decentralized financial project concept that you want to experiment with and build:
- What should I do first?
- Name the important things that need to be considered.
- How could you make sure that the product solves a genuine user problem?
- I’ve identified a problem, but how can I be sure that potential customers will be interested enough in it to use my solution to solve it?
- How do I calculate how much time and resources I’ll need to complete a project?
Before you even start your excursion into the market, a product discovery phase may help you find answers to these questions and ensure that each essential component of your product is clear and well-defined.
What is product discovery?
Product discovery assists you in validating your DeFi’s business plan against a market fit and preparing your product for further development.
Furthermore, the result of this phase will guide you and enhance your decision-making during the project process. Moreover, the goal of product discovery is to understand the problems and needs of the end-users.
What is the significance of product discovery?
Product discovery, when properly designed and done, is the most successful and low-cost technique to:
- Verify the product-market fit.
- Determine the scope of the MVP (Minimum Viable Product).
- Make decisions based on data.
- Create a tested hypothesis that you can share with your investors.
- Essentials of a Product discovery
You can structure your product discovery in a variety of ways:
Identify the problem
Identifying the problem is the key aspect that many companies struggle to find. But, if you aren’t working on the right one, the project will fail. You can identify the problems with these parameters:
- Market Research
- User Research
- Competitor Research
- Product and support data
As the name suggests, it is a future vision of what your product would be like. Also, it helps them understand the purpose of your project, and when done right, it will motivate them to produce their best.
The vision should sense a story regarding the things below:
- What kind of decentralized finance product are you building?
- Who is it for?
- Why does it matter?
Identifying a target user will help you build a project for the exact needs of the user and focus on the specific problem that you are monitoring. The target user represents a set of people with shared characteristics, like the demographic goals of those who are interested in your product. However, you need to conduct a market research study by conversing with them to identify those people.
A customer journey map is something that depicts the steps a customer or prospect takes to achieve a goal with your firm. With this, you will be able to identify what motivates the users to achieve their goals. Also, you can structure the touchpoints to ensure an effective and efficient process for your customers.
Touchpoints in a new user’s customer journey:
Customer value proposition
The Value Proposition for Customers Canvas can assist in positioning a product or service around a customer’s values and needs.
Pains: the bad experiences, emotions and risks that the client has during the work completion process.
Customers’ jobs: the functional, social and emotional tasks they’re trying to do, the issues they’re trying to solve, and the wants they’re trying to meet.
Gains: the advantages that the customer expects and requires in order for the job to be completed.
Value map Pain relievers: a detailed description of how the product or service relieves the customer’s discomfort.
Products and services: those that generate profit, alleviate suffering and support the production of value for the consumer.
Creators of Gains: how the product or service provides added value and benefits to the customer.
Hypotheses are tested and evaluated in the following ways:
You can test and assess your theories in a variety of ways, including:
- User interviews
- Focus groups
- Design sprint
User story mapping
Now that you’ve successfully tested your hypothesis (if you haven’t, go back to the previous steps), it’s time to figure out what you need to build and which features should be included. This is where user-story mapping comes in: it focuses on the user’s experience and helps to identify the MVP quickly.
When you map user stories on a horizontal line, you’ll end up with a series of sequential buckets or categories that reflect each stage of the user’s journey through your product. With these categories, you can use the customer journey stages (touchpoints) that you specified before.
Then, along a vertical line, you rate these tasks in order of priority from top to bottom. This allows you to prioritize the features you’ll concentrate on.
Finally, you can divide these tales into releases and sprints by drawing a line across them.
Developing a DeFi project requires knowledge regarding finance, blockchain and cybersecurity. Also, it is important to analyze artifacts of the product discovery phase to make sure that the designed business logic is implemented and offers an optimal architectural solution.
Here are the things to be defined:
- Blockchain network to run the decentralized application.
- The most crucial characteristics of the blockchain.
- The logic of smart contracts.
- Smart contract protection (security).
- To construct a blockchain solution,
- you’ll need a tech stack, among other things.
As you can see, taking a DeFi project from concept to reality necessitates a lot of initial research, testing and evaluation of your ideas and hypotheses, as well as risk and opportunity analysis. This is why you should outsource such software development to a technical partner with the necessary knowledge, such as a company that will provide you with a development process adapted to your specific requirements.
Darly Dixon is a Blockchain Specialist at Blockchain App Factory.