AL #56: Building Paladin: The Figue Interview
How Paladin survived the bear market and pivoted to profitability.
Crypto is an industry where capital network effects translate into power law outcomes.
Protocols either find their big launch and become industry darlings or disappear into irrelevance.
And they rarely recover from the latter.
I recently had the pleasure of speaking to Figue, the Founder of Paladin who have done just that.
From a start in focusing on creating governance infrastructure they have found home in building liquidity flywheels for stablecoin protocols netting them a tangible $0.5M protocol revenue stream.
Auditless is bootstrapped and for me there isn't much to learn from protocols that go from $0 to $100M in market cap just by partnering with the right VC and executing an explosive growth plan (although I deeply respect the approach of using unfair advantages).
Instead, I think we can all learn from projects like Paladin that find market wedges and compound advantages in a more resourceful way.
So I'm privileged to feature Figue in our 2nd ever interview.
The Interview
Q: How would you describe Paladin today?
Paladin helps projects grow their liquidity on chain. While we initially set out to shake up activism with governance markets, we realised our users were using these vote markets in order to participate in the Curve wars in order to grow and sustain their liquidity needs. From these vote marketplaces, we are now scaling a full blown liquidity management tool set for projects.
Q: What was your journey to get to crypto and then to Paladin? How has that informed your philosophy in crypto and shaped how you build Paladin?
I got into crypto via Reddit in 2016, but never got much further than "it’s a fun money game on chain". The real revelation came later, in 2019 when I heard Maker and EthLend's pitch. Coming from a banking law background it clicked for me: it was an opportunity to reset the current financial paradigm. I am a firm believer the stronger impact crypto can have is on the social side, as we remove part of trust assumptions we need to live together. I also believe in its capacity of enabling people to fork out of a current political or economic system, which is a vastly underrated new freedom.
Q: How did you find your first users for each side of the market?
First clients were jumbled a lot as we released our first flagship product on the week of the Terra downfall. But it was a natural fit with their needs and our offering. Other side of the market is much more natural ad: we simply offer them yield, so it just needs to be competitive.
Q: You did a bunch of iteration in the bear market and eventually helped the DAO reach $0.5M in revenue and counting. Tell us about the process you went through.
Truth to be told, we got very lucky as our revenue started picking up as we were running out of funds. While we are profitable we have learnt a lot from the past cycles and our building mindset has evolved. We were a very opportunistic builder beforehand, but we are now focusing on our flagship product, doubling down on building a full vertical for liquidity management. Every other good idea we have is now pushed as a project we try to incubate.
Q: What are your biggest levers for revenue growth going forward?
With the release of Quest v2 in November 2023 we feel we have built a strong enough base we can build on, not just for vote incentives, but everything around. While it is a marketplace for Curve and Balancer liquidity, we see the expansion to new AMMs as a very large lever of growth.
Additionally we feel that the impending release of our new tokenomics will set our marketplace apart as it will become the cheapest place to incentivize for projects and the most lucrative one for aligned voters. Such move should enable us to capture a much more significant share of the market. Once we get there, we are in the final design phase of a product we feel could change the whole project by an additional order of magnitude.
“Once we get there, we are in the final design phase of a product we feel could change the whole project by an additional order of magnitude.”
Q: You have been working on Paladin for 3 years, which in crypto is a long time. Why are you passionate about this problem space in particular?
Crypto is by definition a very stimulating environment, that runs 24/7, with a curious combination of the best and worst ideas. I doubt anyone comes in with an idea and is able to stick precisely with it over the long term, visions evolve with the life lessons you are confronted to. What started as an idea to coordinate people with better governance has morphed into what you could call market governance. In the end, I am truly passionate about the opportunity to build algorithmic ways to coordinate.
Q: You also write a great Substack on protocols. You recently wrote about how every project will have its own stablecoin. Can you talk more about that and how has this thesis evolved in your head since then?
Stablecoins weren't really on our radar when we started building Paladin. However, our liquidity management services are used by a large amount of stablecoin providers, and through our experiences we realised that the barriers of entry to this sector were pretty low once you had risk management and liquidity management handled.
To be honest, the idea put forward in this article isn't from us but from Frax with their vision they coined Stablecoin Maximalism. From their words they believe stablecoins are the gravity center of any economic system, and that by creating a strong incentive game around their reference asset, they will become the central point of stability systems. Our vision is slightly different on the topic as it seems it will become increasingly difficult to stand out in a massively overcrowded industry dominated by first movers (USDC, USDT, DAI...) who have accumulated close to unbeatable network effects. This doesn't mean you shouldn't build a stablecoin, but that you shouldn't compete with them. Stability is close to dark magic and in its exploration I expect us to discover tons of unexpected new utilities.
“Stability is close to dark magic and in its exploration I expect us to discover tons of unexpected new utilities.”
Q: What advice would you give to someone looking to build a revenue generating protocol today?
In the words of a famous fictional character : "If you show revenue, people will ask you how much and it will never be enough".
Building early revenue is both a strong signal of resilience, and a weak signal of lack of potential if expenses don't balloon with it for the sole target of exponential growth. From a European entrepreneur, it seems like the American way of hyper-scaling, while it is surely an efficient way of building billion dollar businesses at a record rate, I am not sure it is the best way to scale a project.
It is very obvious that you need to strike the iron while it's hot as hype can die down very quickly, but hype is what creates a good raise, not a good product, and in the end, you build for long lasting clients, no never ending cycles of fundraising.
“Once you have cornered your niche, it is much easier to expand out and generalize your product. But it all starts with one good client.”
The only advice I see is starting with a niche, focusing on getting one satisfied client and progressively expand out to the rest of the market. Once you have cornered your niche, it is much easier to expand out and generalize your product. But it all starts with one good client.