Domination Finance founder: trade Bitcoin's market share, not its price

Ashton Addison: How did your background in crypto lead you to start Domination Finance?▶ 00:39

Michal Cymbalisty: My crypto journey started with one of our co-founders, Adrian. We were good friends before we were co-founders. I got to experience the 2017 bull run as a junior in college, and after that thrill I never really turned back from the space. After graduating I spent a year at Exodus wallet, which is where the early seeds of Domination Finance appeared. When I came to New York I met the UMA team before they were even live on mainnet, and the possibilities of their protocol got us really excited. We always saw that trading Bitcoin dominance was something that was lacking, regardless of people's sentiment. For DeFi to really evolve, we want formal tools that people can trade and use as portfolio hedges as they see fit.

Ashton: What is the thesis behind Domination Finance?▶ 02:00

Michal: A lot of our team came from early-stage venture and weren't even crypto native, so the crux was to listen to the market and build for what exists. Bitcoin dominance was a metric you saw on Twitter and in forums all the time, yet for some reason it was never directly tradable. We don't really care if Bitcoin's trading at $10,000 or $100,000. We're interested in what percent of the crypto pie Bitcoin has. In a market upturn it's not as exciting, because you'll get your 2x and 3x faster on volatile assets. But when the market moves like it did this morning, it's a really cool hedge that lets investors get some upside even when the market is red in US dollar terms.

Ashton: For investors who haven't traded it, what does trading Bitcoin dominance actually mean?▶ 03:19

Michal: It's almost like betting on how much of the pie a certain coin is going to eat. If your average investor only has Bitcoin exposure, a really good hedge would be shorting Bitcoin dominance. If all coins outperform Bitcoin, you still have your spot holdings, and the hedge lets you capture some of that upside. The reverse also works. If you're really into Ethereum but don't hold Bitcoin, you could open a long position on Bitcoin dominance on our exchange. That's the counteracting bet in case Bitcoin outperforms the broader market.

Ashton: The platform is live. How does it work in practice?▶ 05:01

Michal: We are live right now. Users first mint long and short tokens, using a smart contract template from UMA. USDC is locked up as collateral, and for each 100 USDC you get one tokenized Bitcoin dominance long token and one short token. Once they're minted, you can add them to liquidity. We're plugged into Uniswap on Ethereum, in a 50/50 ratio of the tokenized dominance index and USDC. Or you can sell one side if you want to minimize that exposure. Eventually you can buy it back and reunite the pair for your collateral.

Ashton: What is UMA, and why did you build on it?▶ 08:26

Michal: I like to dub UMA a generalized community oracle. What's unique is that, through their governance process, they let you submit a custom price feed. All our data comes directly from CoinGecko. We built a custom API internally and pushed it through UMA's governance process, and that became the source of truth. UMA also works differently at minting, because there are no oracle calls on chain. That's why you get one long and one short token for each 100 USDC of collateral. Other oracles tend to congest networks and be push-intensive, whereas UMA only looks for the price at the expiration or maturity date.

Ashton: So the dominance figure comes from CoinGecko?▶ 09:28

Michal: Exactly. Broadly speaking, they're recognized as the source of truth in crypto right now. We never wanted to be in the business of having our own methodology for Bitcoin dominance. Why not leverage a site with tens of millions of users every day and just let people trade that metric? We're excited to have partnered with them, and they're actually one of our small investors as well.

Ashton: You're live. How much traction have you seen so far?▶ 06:28

Michal: We wanted to be live for our funding announcement last week, and we didn't focus on fronting a lot of liquidity or usage from the start. Over the next couple of weeks we're focused on bringing in larger players, ideally institutional capital, so there can be ample liquidity. We're not incentivizing anything yet, either with partners or with token rewards, so we're letting the platform gain traction naturally. Once large money is in the pools it becomes easier for retail investors, because the minting and adding steps are more complicated. Over the coming months, a big development will be simplifying that, so average investors can use a simple UI, hit the green long or red short button and get exposure in two clicks.

Ashton: What's planned for the rest of 2021?▶ 10:40

Michal: The first focus is bringing in larger, institutionally geared capital so the platform is really usable for a lot of people. In broad strokes, we're also very interested in branching across other L1s and L2s. We see the future being multi-chain. And we'll be structuring incentive programs, with partners like UMA, to encourage adding liquidity, trading and using the platform in different ways.

Ashton: Where do you see DeFi heading, and how does Domination Finance fit in?▶ 11:21

Michal: After the last year or so, it's hard to refute that DeFi and decentralized applications are going to be the crux of the future in crypto. So many cool things popped up over the last 12 to 15 months that it's here to stay, and TVL is pushing $100 billion. We want to be an option for people to use in their portfolios. We want Domination Finance to be that spot where they can come and flip the script and start focusing on market share instead of price. Bitcoin dominance is the main metric, but our community has asked about other things. People have been interested in DeFi dominance, NFT dominance, or FTX dominance among centralized exchanges. With the growth of DeFi, we can give traders and investors really unique tools for their portfolios.