Problem statements to solve for a retail investor in DeFi

The first section of the article inspects the various user personas interacting with DeFi protocols and their individual requirements. The second section identifies various products which solve for these use cases. We mostly look for on-chain use cases which already have a reasonable amount of adoption. This post simply surfaces the various participants across the value chain and identifies open problems. Some cutting-edge novel cases with nascent adoption might get overlooked. Nevertheless, we keep an eye out for unsolved/potential growth segments and see what we can build there.

User Personas

Broad retail requirements for interacting with financial services and products can be classified as:

Currently, the first two user personas (Investor and the speculator) are the most common place in DeFi. In fact every other use case is in fact a minority. Lets look at them deeper.

Average investorSpeculator/ trader
Wants economic exposure to DeFi. Is not every sophisticated, intends to make +ve ROI, wants an engaging experience.Wants a platform get access to capital and trade/gamble. High returns on capital is the ultimate priority.
Product requirements

- Savings
- Investing
- Lending/Borrowing
- Insurance
Product Requirements

- Investing
- Trading across asset classes
- Coin/NFT launchpads
- Credit (Lending/Borrowing/Leverage)
- Other financial products (derivatives/swaps/bonds/etc)
- Insurance
- Data and Analytics
First priorities

- Easy on-ramp and off-ramp
- High yield products
- Minimal friction while adding/removing/transferring/spending money
- KYC/Identity
- Regulatory/Compliance and clarity
- Taxation/Ease of filing
- Trust/Safety in the platform
- Principal protection (low volatility) for investment products
- Easy to use (non complicated) UX
- Wants a personalized UX which is engaging as well as efficient
- Easy Access everywhere (on mobile while travelling)
- Speed of transactions have to instantaneous
- (Single preferably) centralized market place/platform access to all products
- Variety of markets available
- Custody/Asset management
- Cheap transaction costs
- Best APR/APY (for savings/investments) and credit products
- Easy onboarding
First priorities

- Everything from Average investor
- Advanced feature rich snappy UX
- Portfolio management
- Strategy builder
- Risk Management
- Centralized market place/platform access to all products
- Variety of markets available with sufficient liquidity to do big trades
- Derivatives/Spot/Prediction/FX products
- Integration with other DeFi protocols
- Regulatory compliance/clarity
- Custody/Asset management
- Rakeback for transaction fees
- Best margin funding rate/leverage tools
- Lowest interest fees
- Best bid/offer spread
- Low slippage
- Easy onboarding
- Capital efficiency(DeFi composability)
- Loyalty programs

Broad institutional personas who interact with financial services and products can be classified as:

They all want economic exposure to DeFi and to leverage the benefits of transacting on-chain (distributed/ decentralized/trust less/ permission less/cheaper / available/etc). Some requirements for the above actors:

Product Requirements:

Everything from a retail speculator 
Risk ManagementPortfolio management
Data and Analytics servicesCredit management
Client relationship managementInvoice financing
Supply chain financingEquity financing
B2B payments and transfersPayroll
InsuranceForeign exchange
Principal protected yieldTreasury management

Products which solve core user requirements which overlap across the most number of personas have the highest likelihood of attaining scalable PMF (duh!). Now, we shall the investigate the user journey of these personas and try to understand the active participants in the value chain.

Profit pools are nothing but the total profit earned at all points along the value chain of an industry. When we analyse a value chain, it becomes imperative to define the boundaries of the sub-segment before digging deeper. Each of these segment profitability may, for example, vary widely by customer group, product category, geographic market, or distribution channel. Moreover, the pattern of profit concentration in an industry is often very different from the pattern of revenue concentration. You can check this article on HBR to know how to map an industry’s pool.

In this section, we attempt to dig deeper into some open problem statements and propose possible solutions. In the next article, we shall investigate these participants from a profit/operating margin PoV to understand which problem statement is worth solving financially.

User Journey

Lets pick an average retail DeFI investor and look at their user journey.

Intent to invest

Now, lets break down each of these steps and inspect the actors.

Custody and Asset Management

Similar to how fiat money is usually stored in savings accounts, central depositories, etc, crypto currencies have to stored in an online equivalent. Blockchains use digital signatures to secure money. Digital signatures are a pair of random keys, where one key is a “private key” and the other a “public key”. Through digital signatures, any person with the “private key” can “sign” a transaction and spend the digital currencies. Therefore, it is crucial to safeguard the “private key”. Some tech-savvy users of blockchains opt to safeguard this key themselves, and accept the risk of theft or loss of the key (and therefore the loss of their funds). In contrast, other blockchain users trust online wallets or exchanges with the safeguarding of their keys.

Custody management solutions overlap typically with the first step in the boarding process.Here, we are primarily focussing on the DeFi custody experience and not CeX related on-boarding flows.

Using the user requirements we looked at in the first step, lets see where the current gaps exist:

Let’s look at the current type of wallets and understand what they do:


Exchange wallets

Third party custody

What can we work on?:

Identity (Polygon ID,

These Dapps which the users want to interact with are built on top of blockchains which we will investigate in the next section. While an average CeX user may not even interact with blockchains (just buys on Coinbase and doesn’t do anything else), we are discussing about a web3 DeFi investor here. The user also doesn’t pay for these services as they are usually available for free but instead monetized through adjacent offerings. In the next section, we shall look at some of the core infra DeFi products as well.


This is the plumbing needed for all of web3 to function. As an user, I don’t really care how what the name of the chain is or the infrastructure complexity. The only requirements here are:

The participants here include:

What can we work on?:

Above DeFi actors capture majority of the value in this step. They are directly/in-directly involved with every user transacting on chain and thereby also are at an intersection of the most value transferred. In the next post, we shall look at some key metrics to evaluate these actors across the value chain.

Now the user has a wallet and connected to a chain to transact. Its time to move on to looking at the next participants in this value chain

On-Ramp and exchanges

Remembering that our user is a retail DeFi investor, lets look at some user requirements and pain points:

Some participants here:

what problems to work on?

Dapp interaction

Now that the user has converted his/her to fiat to crypto, lets look at the journey to invest in Dapps. As an user, my primary requirements would be:

For the next wave of Defi products to be bigger than the previous/current state we need an influx of new set of users who have never used these products before. Making these investment Dapp retail-newbie friendly is paramount.


As we look across the value chain of a retail investor, we notice that major value transacts across these players:

Now, depending on which business we are trying to enter, you can further double click to understand all adjacent offerings as well. A liquid staking service would eventually move into wallets to capture more TVL or approach the same problem from the perspective of an institution to offer DeFi products with access controls for risk profile/taxation/regulations etc.

Checkout my other related posts too:

· defi, crypto, web3, user