Brothers Jolyon and Harry Horsfall, co-founders at TotemFi, joined host Oscar Hammond to discuss the company’s DeFi prediction protocol, which allows users to earn TOTM and BTC rewards.
(0:33) For Harry, the journey into bitcoin began in 2013 when he was running a music festival. He heard Coinscrum’s Paul Gordon giving a speech about bitcoin and was hooked. A week after buying up as much as he could afford at the time, the market dropped 90%. Harry experienced that raw feeling that accompanies seeing a red candle, and he held on for dear life. He then held various roles at startups and spent a few years at a top exchange.
(1:50) Jolyon was pushed into crypto by his brother in 2013/2014 and describes it as a “good brotherly lesson to start off.” He comes from a more traditional finance background with a focus on corporate and international law. For the past seven months, the brothers have been plugging away behind the scenes at TotemFi in the hopes of building something pretty cool.
(2:49) During the DeFi summer, Jolyon and Harry were seeing a lot of purely staking coins coming out, whose functionality was to lock up the staking coin for a fixed term. They thought of adding the functionality of having predictions, where you enter prediction pools for a fixed period and have to predict the price of that particular onchain asset at the end of the pool. Then you get staking returns throughout the prediction pool and additional returns for how well your prediction turned out.
It also didn’t hurt that they saw Vitalik Buterin tweeting about the prediction markets being underserved. The key was to make the prediction markets really accessible and strip back a lot of the clutter on some of the other things. When gas fees come down, it will be a lot easier to use, noted Harry.
(4:23) The TotemFi team is based all over the world, including people who are really passionate about crypto and those who have just jumped in. They’ve built up a strong developer team including lots of Solidity devs and front-end devs as well as folks for branding.
(4:55) “The bit on the branding is that Totem is like a family, the pack of animals…we’re obviously brothers. And that’s very much the foundation of it where we’re coming together to try and build something 1.) that‘s going to be engaging and 2.) everyone in the company and foundation really cares about,” said Jolyon.
Jolyon and Harry had some good connections before building the TotemFi decentralized application (dApp), including award-winning designers. They worked closely with them to make sure the user interface was really sleek and on-point because accessibility was definitely something they wanted. They’ve used a lot of the dApps out there. There are huge variations and some clunky ones, which isn’t ideal when people are staking thousands.
6:12 “So what we’re really keen to do is have very succinct information, strong, dynamic ROI calculators, clear instructions, tooltips — these kinds of bits that really add to the whole user experience to actually entering a prediction so people aren’t in those compromising positions,” said Jolyon, adding that interacting with MetaMask can sometimes be difficult.
They also had to make sure it was built close to the token generation event (TGE). They will go out with their main coin. In a few months, it will be ready to go and people can use it.
(7:26) The dApp design and prediction model will be targeted to a lot of people. It’s basically entry-level. They’ve got a non-punitive prediction model. So when you predict, you won’t actually be penalized for inaccurate predictions, for example, if you predict that bitcoin will be at USD 60,000 at the end of a 15-day period and it melts to USD 200,000. TotemFi is market agnostic and people can also predict when the bitcoin price is going to fall.
(7:44) “One of the key barriers to entry to prediction markets is people aren’t expert analysts or chartists…And that’s specifically relevant in crypto where it’s so volatile. So we wanted something where we could make sure that people who are adept chartists and analysts could do well from using our prediction model. But at the same time, people who are less experienced and maybe starting their way in the DeFi or prediction world aren’t put off actually entering into our prediction protocol,” said Jolyon.
(10:04) TotemFi’s first prediction market is bitcoin, but there are loads of things they are planning to build. These include on-chain assets ETH, Cardano and DOT and potential off-chain assets such as Tesla, gold, etc. The team is also looking at non-price-related events such as prediction pools for political or other world events. And they may include specific events, such as when will bitcoin hit USD 100K?
TotemFi doesn’t want to dictate the prediction pools. Instead, they want to kick it off and hand it over to community governance to spin out their own pools.
(11:40) “The prediction markets haven’t been massively solved yet. And we don’t think we can solve it on our own. And we’re talking to other prediction markets and how we can do cross-chain pools,” said Harry, adding that the focus one is getting the product working and released.
(12:57) TotemFi is building on Ethereum, and they have bitcoin prediction markets. When they were initially building, the community was looking ahead to what was in the cards for scaling and Eth 2.0. Also, they needed the smart contract functionality on Ethereum, while bitcoin addresses the real value creation.
For lots of DeFi projects, the inflation rate is very high. As the yield farming protocols and total value locked expand, they have to give away higher amounts or the APY gets diluted. TotemFi wanted to make sure the adjusted real rewards that are interacting with the protocol remain high. One way to do that is to give away the reward in BTC. That’s why there is that cross-chain.
(15:00) The Ethereum gas fees are frustratingly expensive at the moment. But it also is a reflection of demand. And the high gas-fee problem will likely be solved. Still, TotemFi is looking at other chains and there are a lot of conversations going on behind the scenes. Whatever is best for the end-user is where they’ll end up, said Harry, adding that he’s chain agnostic.
Prediction Market Differentiators
(16:25) One of the main things to differentiate TotemFi is its non-punitive markets feature. In other prediction markets, it’s you lose, I win; it’s a zero-sum game. TotemFi tried to put the pain of the loss on the background volume. They have a 3% recall function similar to other DeFi products where there’s 2-3% on staking or selling the coin. The 3% is not fixed and can be adjusted.
(20:44) One of the pillars they’ve founded the whole project on is the wisdom of the crowds, from an Aristotelian idea of a group having higher accuracy when they predict as a group. Jolyon asks, “Can the crypto community do the impossible?” If the weighted averages of all predictions are within a certain band, everyone in that pool gets additionally rewarded. The hope is to keep this going long-term. There are checks and balances in place to keep it fair.
(23:42) TotemFi has six or seven strategic partners and they were also incubated by DuckDAO, which is going to help them with an IDO on the launchpad for DuckStarter. They also boast lots of investors who have invested in the token from the beginning. When they did their strategic round, they saw over USD 30 million pledged for their project. Jolyon and Harry had to pick, which was very hard to do. There were thousands of pages of responses, not just from VCs, which to Jolyon and Harry is what it’s all about — democratizing finance.
The project also has the strength of its advisory board behind them, comprising seven-10 people who are helping with introductions, etc.
26:09 “We have the micro-cap. We are launching at a USD 295K market cap. Our strategic raise was only USD 255K. We have a very fair tokenomics where it’s not even 1x between seed and public,” said Jolyon.