We will continue to grow and diversify our user base across 12+ different blockchains and token ecosystems. This makes Request Finance a great product for our users who needn’t worry about not being able accept payments in any token or on any chain. But it also limits our exposure to risks inherent to any one ecosystem like Terra.
Secondly, we did not ape into yield farming on Anchor Protocol (ANC), the savings, lending and borrowing platform built on the Terra Blockchain, offering up to 19.5% APY. Risk management is a cornerstone of how we manage our own treasury, and every other aspect of our business like marketing or product development. We take measured risks, experiment constantly, and never commit ourselves irreversibly to any one course of action, especially if it involves significant resources.
Cashflow is to companies what oxygen is to our bodies. Starved of oxygen, irreparable brain damage occurs within just four minutes. After 10 minutes without oxygen, brain death occurs. Similarly, the financial health of Request Finance directly impacts our ability to continue shipping products our users love. It also impacts our ability to attract the best talent to build the best products with us.
These crashes are not new, nor even unique to the crypto capital markets. The iron laws of economics and finance cannot be suspended by wishful thinking or technological wizardry. We hope that the Terra saga will drive home the importance of risk management to all of us. It isn’t the first, and certainly won’t be the last of its kind.
While we are unscathed from any direct exposure to the Terra ecosystem, it is important to note that the highly interoperable nature of open-source code, and the general interconnectedness of crypto-native assets is both its best feature and worst bug. Like with pandemics, financial crises also hold risks related to contagion from the immediate fallout. Economists refer to this as systematic, or market risk that cannot be diversified away.
Interoperability is a double-edged sword in all systems. The more interconnected our systems are, the less friction exists and more innovations can build on top of each other like legos. But at the same time, those very same channels become transmission vectors - from fires, to diseases, or financial risks. As with the Great Financial Crisis in 2008, in crypto, this can happen when underlying assets being held as collateral across protocols fall in value.
The Terra collapse, combined with existing macroeconomic headwinds such as general inflationary fears and rising interest rates - have led to sharp corrections in asset prices in both the crypto and equities markets.
These threats to global macroeconomic growth are covered in greater detail in the International Monetary Fund’s (IMF) latest global financial stability report. We disagree with many of the policies imposed, and conclusions presented by the IMF - particularly with respect to crypto and DeFi. But the analyses are informative and robust.
Request Finance serves many large players across different blockchains and token ecosystems, as well as different crypto verticals like DeFi, DAOs, and the Metaverse. We are also prudent in our approach to treasury management and take measures to cut our losses quickly in everything we do.
These have shielded Request Finance from the lunacy surrounding the precipitous decline of the Terra ecosystem assets of late. However, there remain broader macroeconomic risks which cannot be ignored. Our growth depends on businesses spending in crypto.
Despite these broader market risks, we have yet to observe a decline in our usage statistics, and will continue to monitor the situation in our monthly Request In Numbers report.
We strongly believe that there is, and will continue to be long-term, fundamental value in the use of blockchain technologies in various use cases like finance, art, and entertainment. This is not only related to faster, cheaper cross border payments, but also the efficiency gains that come with smart contracts, and other DeFi innovations.