"Why NFX Invested in Carapace: The Protocol Making Crypto Lending Safer" and "Why consumer product metrics are all terrible" - Finding Common Ground in the World of DeFi and Consumer Product Metrics



Jul 11, 20233 min read


"Why NFX Invested in Carapace: The Protocol Making Crypto Lending Safer" and "Why consumer product metrics are all terrible" - Finding Common Ground in the World of DeFi and Consumer Product Metrics

In the ever-evolving landscape of decentralized finance (DeFi), one missing piece of infrastructure has been a protocol to insure loans against default. This crucial element is necessary to instill confidence and provide risk protection for participants in the DeFi space. Enter Carapace, a protocol that aims to make crypto lending safer by creating a two-sided marketplace where traders can swap their default risk.

Carapace operates on a simple premise: protection buyers pay a premium for the right to claim protection when an underlying loan defaults, while protection sellers provide pooled capital for cover in exchange for a premium. The protocol constantly adjusts based on supply and demand, ensuring that protection sellers have access to capital for risk protection. In the event of a default, a payout is made to protection buyers. This innovative approach to insuring loans brings a new level of safety and security to the DeFi ecosystem.

But what does this have to do with consumer product metrics? Surprisingly, there are common threads that tie these seemingly disparate topics together. Both Carapace and consumer product metrics highlight the importance of engagement and user behavior.

When examining consumer product metrics, it becomes apparent that user engagement is a significant challenge. A typical product may see a staggering 90% of users refuse to sign up initially. Even among those who do sign up, over 90% eventually become disengaged and inactive over time. This disengagement can be attributed to various factors, such as the difficulty of integrating the product into users' existing behaviors or the lack of a personal connection within the service.

Carapace's approach to safer lending aligns with these insights. By offering protection buyers the opportunity to claim coverage when a loan defaults, Carapace taps into users' desire for risk protection and peace of mind. This ties into their pre-existing behavior of seeking financial security and aligns with their natural inclination to protect their investments.

Furthermore, Carapace's partnership with Goldfinch, a prominent DeFi credit protocol, demonstrates the value of embedding their protocol into existing infrastructure. This approach mirrors the concept of tying consumer product metrics into someone's pre-existing behaviors. By utilizing established platforms and networks, Carapace can seamlessly integrate their protocol into the DeFi ecosystem, making it more accessible and enticing for users.

However, the challenges faced by both Carapace and consumer product metrics should not be underestimated. In the realm of DeFi, the need for a protocol like Carapace highlights the inherent risks and uncertainties of decentralized lending. Similarly, consumer product metrics reveal the difficulties of creating a dynamic and engaging user experience that resonates with a wide audience.

So, what can we take away from these insights? Here are three actionable pieces of advice:

1. Focus on understanding user behavior and aligning your product with their existing habits. Don't ask users to do something entirely new; instead, find ways to tie your product into their pre-existing behaviors.

2. Foster personal connections within your product or service. Backfill users' feeds with content from others or create a sense of community to enhance engagement and foster a positive user experience.

3. Strive for continuous improvement and aim for greatness. While a 30% daily active user to monthly active user ratio may be considered good, there are examples like WhatsApp with a 70% ratio that demonstrate what can be achieved with exceptional user engagement.

In conclusion, the investment in Carapace by NFX and the challenges of consumer product metrics share common ground. Both highlight the importance of understanding user behavior, finding ways to align products with pre-existing habits, and fostering engagement and personal connections. By applying these insights, we can strive to create safer and more engaging experiences in the world of DeFi and consumer products.


  1. "Why NFX Invested in Carapace: The Protocol Making Crypto Lending Safer", https://www.nfx.com/post/why-nfx-invested-in-carapace (Glasp)
  2. "Why consumer product metrics are all terrible", https://andrewchen.com/why-consumer-product-metrics-are-all-terrible/ (Glasp)

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