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Retrospective on 2022 and the Journey Ahead

2022 has been a year of rapid change and growth for Sommelier. From co-processor for Ethereum to marketplace for asset trading strategies to the launch of Strategy Tokens, we couldn’t be more excited about the technology we’ve built and the momentum we have heading into 2023. Looking back, here’s a quick recap of the highlights from the past year:

Commitment to Advancing Open, Transparent Financial Systems

Coming into 2022, we grew increasingly alarmed by the growth of the custodial financial intermediaries positioning themselves between users and blockchains. To be clear, some of these companies play a vital role in onboarding new users to crypto. However, it becomes dangerous when these custodial entities become the final destination for users rather than a stepping stone to the non-custodial, transparent world of public blockchains and decentralized applications. The known flaws of these institutions, particularly in terms of opacity and controlling users’ funds, quickly showed themselves in the worst possible light with Celsius, FTX, and a number of others.

While it had been disturbing to witness, it validated the path we’d chosen at Sommelier of advancing open, transparent financial systems. Earlier this year we decided to take the Ethereum co-processor architecture we’d built and use it to enable crypto and financial markets experts to bring their strategies into a DeFi context. In doing so, we’d democratize access to an array of DeFi strategies making it easier to earn and manage your crypto. Importantly, users would retain sole custody of their assets and have transparency with regards to on-chain reserves and trade execution.

The Launch of Yield Optimization, Portfolio Management and Trading Strategies

In July this vision came to life with the launch of a yield optimization strategy for stablecoins on Aave which quickly gained $1M in TVL. The launch of this strategy proved our technology and we began to rapidly release more complex strategies. In October we expanded to portfolio management strategies with the launch of the Momentum and Trend strategies for ETH-BTC portfolios. The breadth of products expanded once again in November when we offered the Steady trading strategies for ETH and BTC. Finally, to wrap up the year, the first altcoin strategies were launched for MATIC and UNI. All in all, we launched 2 strategies a month in Q4.

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Increasing Accessibility Through Strategy Tokens

After the launch of the Aave stablecoin strategy, we leaned further into making access to these strategies even simpler by using the new ERC-4626 vault standard on Ethereum to tokenize shares in the strategies as Strategy Tokens. As we saw people suffering from losses on platforms like Celsius and FTX it was clear that a major reason people had been attracted to their products was the ease of use, and we wanted to bring DeFi forward to be competitive on UX terms.

Decentralized exchanges have been the most popular apps within DeFi, so it was only natural that we bring strategies onto DEXes, first Uniswap V3 and most recently Injective, giving natives of both the Ethereum and IBC ecosystems an easy, intuitive way to enter and exit strategies.

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2023: More Strategists, Updated Cellar Capabilities, Multi-Chain Expansion and SOMM Staking

As we charge into 2023, we’re excited to bring more strategy providers into the fold with a greater diversity of strategies for our users. A number of teams are already in the onboarding process, and we invite others to get in touch.

Technically, we’ll be implementing upgrades to our infrastructure to allow for more complex and sophisticated strategies. Now over a year in the works, Cellars V2 will enable any DeFi protocol to connect with the smart contract vaults where strategies are implemented. This means strategies incorporating multiple DeFi protocols — say, taking on leverage and making loans or capturing arbitrage across multiple exchanges. It also means strategies will be able to trade short as well as long. The design space is truly vast.

In addition, we’ll also be expanding to new EVM-compatible ecosystems allowing us to serve even more DeFi users and enabling strategists to launch strategies around far more assets and DeFi apps.

And lastly (but certainly not least!), we’ll be enabling SOMM staking rewards. SOMM stakers can and will reap the benefits of strategies launching on the platform as they earn a percentage of the fees generated from each strategy.

Happy holidays! Here’s to a fruitful new year! 🥂🍾 🍷

About Sommelier

Sommelier is an asset management protocol, built on the Cosmos SDK, that enables actively managed DeFi vaults on Ethereum. Vaults can do portfolio management, trade long-short, borrow-lend, or even farm. Additionally, Sommelier’s architecture allows independent strategists to leverage the power of off-chain computation by bringing algorithmically managed strategies on-chain. In doing so, Sommelier vaults can dynamically adapt to market conditions which provides enhanced earnings opportunities and risk mitigation to vault users whether they be individuals, institutions, protocols or DAOs . All vaults are enabled by audited smart contracts and controlled by protocol governance.

Sommelier was cofounded in 2020 by a prolific team of Ethereum and Cosmos developers including Zaki Manian and Kristi Poldsam. The protocol is currently in mainnet and actively seeks new contributors and community members.

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