In Decentralized Finance, Two Heads Can Be Better Than One

Sometimes, two heads really are better than one, particularly when those two have been in sync from the start. From founding a consulting business in college to making early forays into blockchain, the two of us, as twins, have depended on each other as completely as finance has come to depend on technology.

We now live a block and a half apart, work at adjacent desks and are collaborating on a project we believe will help transform the way people invest. How do we propose to do that? By introducing Web3—the new incarnation of the internet made possible by blockchain technology—to the kinds of tools and products once reserved for the wealthy clients of old-school banks and brokerages.

Partners From the Start

A lot of mythology surrounds identical twins. No, we don't speak in a secret language, and we can't read each other's thoughts. But our twinship did give us a head start in building that vital element of any business partnership, especially in a young and fast-changing industry: trust.

Like those more famous crypto twins, Gemini co-founders Cameron and Tyler Winklevoss, we also shared two strong interests from an early age: finance and technology. Our father, a business owner and enthusiastic amateur investor, set up brokerage accounts for us when we were just in middle school, so we'd understand how markets worked. And we lived that childhood entrepreneurial cliché: For years, we ran a lemonade stand at neighborhood Fourth of July celebrations.

As we grew, so did our ambitions. In high school, we earned money growing flowers to sell to florists. In college, where we both studied electrical engineering, we founded our first "real" enterprise: VentureStorm. The concept was simple: connect people with great startup ideas to expert engineers or technical co-founders who could help get a project off the ground. It was popular but hard to run at scale.

Our passion for technology surfaced young. In high school, we talked our father into buying us special software so we could try our hand at building websites, but it was too clunky to bring our imaginings to life. When we reached college, we took advantage of the resources available and spent hours teaching ourselves the ins and outs of coding.

Then we discovered Web3. We both knew about bitcoin and were starting to delve into its mechanics when we saw the ethereum white paper. We were captivated. Back in 2014, ethereum was the blockchain that introduced the world to smart contracts—code that removes the need for middlemen by automating agreements between individuals. With ethereum, anyone could conduct transactions without having to go through banks or brokerages. Decentralized finance (DeFi) was born.

We didn't have enough disposable income to buy into the ethereum initial coin offering, but the impression it left stayed with us.

The Eureka Moment

In the summer of 2015, Taylor interned at an investment bank and learned why the world needs DeFi. He saw firsthand the tangle of red tape that chokes off innovation in traditional institutions. We contrasted that with DeFi, where, with just a few lines of code, you can move any asset anywhere. That was our eureka moment. We saw it was time for us to come to grips with cryptocurrency and the huge impact it could have on the financial system.

We believed—and still believe—that blockchain technology has set the stage for a new kind of financial architecture that has the power to make the global economy more efficient, more innovative and, most important, more democratic.

But what could we build to put this potential into practice? For a long time, Taylor had the idea of automating an options trading strategy. An option gives its owner the right, but not the obligation, to buy or sell an asset at a predetermined price at a certain time. Options trading is appealing to ordinary people because it offers the chance to earn good returns on a small outlay. But it can be challenging for new investors to understand and time-consuming for veterans to manage.

The Birth of an Idea

We took the idea to the brokerage that handled our accounts, but it refused to give us access to the technical resources we would have needed to set up such a system. We went away, frustrated. Then one day, as we were taking a walk near our parents' house, it came to us: Automated options trading is the perfect-use case for DeFi.

Our excitement mounted as we talked it through. How do we define an option? How do we code an options contract? What elements need to go into the design of an automated trading system?

And crucially: Which blockchain should we use? By this time, ethereum was no longer the only game in town. Many blockchains supporting smart contract technology had arisen, each with its own distinctive characteristics.

So, as usual, we put our heads together and made a decision on that all-important question as well. We chose Solana, a blockchain favored by developers for its cost-effectiveness and flexibility. Solana is exceptionally fast and uses a unique mechanism to validate transactions that is far more energy-efficient—and thus kinder to the environment—than other networks.

We began to design an options protocol on Solana. And we started entering hackathons—events where developers come together for intensive coding sessions and standout projects can win cash, mentoring or other kinds of support to help them bring their ideas to market.

We entered our first hackathon around Thanksgiving 2020 and left empty-handed. But we managed to win top honors in the second. The structured products platform we built during that marathon coding session has formed the foundation of our current business, PsyFi.

We are both determined that whatever we built together must stay true to the core values of Web3: removal of intermediaries, open-source coding and user control over data. In pursuing this goal, each of us brings complementary skills and unique opinions to the table. There's no holding back in meetings. Neither of us is afraid to speak up when we think the other is heading in the wrong direction. We may get along, but we also have a creative tension that comes from a lifetime spent as mirror images of each other.

That creative tension, coupled with a lifetime's worth of trust, is what allows us to innovate and improvise as we work to build a new financial framework for the world.

Tommy and Taylor Johnson are the co-founders of PsyFi, the top structured financial products provider on the Solana blockchain.