Blockchains power cryptocurrencies. However, their use cases extend far beyond powering digital currency. One of the core use cases for blockchains is enabling the creation of decentralized applications (dApps).
dApps have the potential to transform the way we work, communicate, commute, and much more. For example, we now have access to DeFi protocols, a new financial environment free of third-party control, allowing anybody to access a wide range of financial products and services anywhere. However, the use case for blockchains and dApps extends beyond finance. It will enable the creation of new decentralized services that were previously consolidated, ushering in the next generation of the internet that is owned by its users and builders, Web3.
As Web3 adoption and popularity grow, so does the adoption of dApp tools. Different types of dApp tools have been developed to streamline the development process. For example, we now have IPFS for decentralized storage, The Graph for indexing, and Chainlink for oracles; services that were not available just a few years ago.
Despite the tremendous benefits of “as-a-service” solutions, there is still a key missing piece from the dApp toolkit: a dedicated capital management service (Capital-as-as-service, or CaaS). This is arguably one of the most critical and underserved services for Web3 teams.
Current Challenges for Capital Management
As Web3 organizations mature and accumulate cash flows, it becomes increasingly important for teams to manage capital efficiently in order to support long-term operations and growth. The challenge, however, is that treasury management can be complex from planning, coordinating, operating, to executing. While organizations realize the potential for capital to be deployed into DeFi strategies to earn yield and sustain longer runways, they often refrain from doing so due to the perceived risks, and the time and effort necessary to effectively manage capital.
Capital management must be structured so that it generates consistent cash flows to fund operations, development, and growth. Furthermore, risk parameters must be clearly defined to ensure that capital is protected across multiple market cycles and is not exposed to uncontrolled market volatility. Although capital management is not a new concept, there is currently no comprehensive and automated solution accessible to teams. Some limitations teams face when trying to manage capital include:
- Resource and time: Teams must establish internal capacity and manage capital, which diverts attention away from their core goals - developing products.
- Limited financial skills: Most developers are not native financial managers. Having to do capital allocation and management tasks is a risky proposition.
- Operational risks: Financial, operational, and community risks increase when dealing with capital mobility. Access to purposely created and audited infrastructure, as well as established, automated capital strategies, will aid in avoiding potential blunders.
What is Capital-as-a-Service (CaaS)?
Capital-as-a-Service (CaaS) is the automation of capital management functions. It refers to the ability to grow idle capital through risk-managed strategies with constant monitoring, while still providing immediate access to these funds. CaaS aims to give teams the tools and services needed to use smart contracts to offload, streamline, and automate capital management.
With Exponent’s CaaS offering, teams will get access to their own bespoke, non-custodial vault with pre-defined strategies that satisfy their operational requirements, supplemented by a dedicated dashboard with a risk monitoring and notification system that sends alerts directly to their Telegram or Discord. This will all be accessible through their multisig on Gnosis Safe.
With this, developers can now focus on what they do best: building unique products by delegating capital management needs to a professional service provider.
How CaaS Benefits Developers
Stay Focused on Building your Product: With CaaS, developers can stay focused on building their product as the time, resources, and attention needed for capital management are offloaded to a specialized service provider.
Access to Specialized Services: CaaS provides teams with access to specialized asset and risk management skillsets to comprehensively manage capital in a way that satisfies their operational objectives.
Reduced Engineering Risk: Using a purposely developed and audited infrastructure, CaaS reduces engineering and operational risks for teams. Exponent is built on top of Enzyme Finance and has been audited by Quantstamp.
As Web3 adoption grows, capital management becomes increasingly critical to Web3 organizations for long-term operations and growth. However, teams face an abundance of risks in trying to manage capital in-house. By offering CaaS, Exponent enables teams to offload these capital management functions to a specialized provider so they can focus on developing their core business.
Interested in growing your idle capital?
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