To the Valued Solace Community,

I'm reaching out with a heavy heart and a reflective spirit to inform you that the Solace team will be ceasing operations due to prevailing financial constraints. Despite our relentless efforts to navigate financial challenges and secure a sustainable future for our project, we find ourselves at an impasse. As a result, both Solace and Holdr will be concluding their services. For our LPs, please refer to the note provided at the end of this message.

Our silence in public communication this past year was not without its reasons. As we turn the final page on this venture, I wish to share our story, the hurdles we encountered, and the insights gained.

My journey in blockchain began in 2017, with the inception of Solace in 2020 fueled by a vision to democratize global financial autonomy. My experiences across different cultures underlined the transformative potential of swift, cost-effective international fund transfers for immigrants and global nomads alike. I aimed to contribute by managing the operational risks in open finance tools. However, our industry's expected progress in addressing real-world problems did not materialize as anticipated, leading to a lack of market demand for our product.

Solace Portfolio Insurance, our flagship offering designed for operational risk hedging in DeFi, proved economically unviable in the short term, reflecting a broader trend within the DeFi insurance sector. Despite our strengths in intelligent risk assessment and user experience, our product's anticipated market fit was not realized as expected.

As we navigated through the previous bull run, our product strategy and growth pace misaligned, leading to an over-expanded team relative to our product's success. In hindsight, our focus on user base metrics overshadowed the critical need to engage with users who truly valued our offering. Our market position was further compromised by our reluctance to openly communicate our competitive advantages in risk management.

In response to the Luna crash and subsequent market volatility, we shifted our focus to a B2B model, offering coverage directly to DeFi protocols. This approach aimed to mitigate reliance on individual users, whose demand fluctuates with market trends. We began developing Solace Native, collaborating with protocols interested in FDIC-like coverage for their users. However, challenging market conditions and insufficient underwriting capital deemed our probabilistic underwriting mechanism too risky. After four months of dedicated effort, we had to abandon this initiative.

By September 2022, financial limitations became increasingly pressing, necessitating cost reductions and a reassessment of our approach. However, we acted too conservatively in downsizing, restricting our strategic outlook and hampering long-term planning.

Despite pivoting towards alternative models, such as audit insurance, we faced disinterest from potential stakeholders and protracted negotiations. Our subsequent venture, Holdr, despite the support of Aurora, failed to yield the anticipated results, stretching our resources thinly.

Our last initiative aimed to revolutionize DeFi insurance by eliminating reliance on centralized DAO-driven underwriting and discretionary claims. Yet, despite a promising design, financial support was insufficient to bring this concept to market.

The long-term vision for our product appears misaligned. We initially envisioned fully decentralized insurance appealing to individual users. However, practical challenges suggest that certain aspects necessitate some centralization or counter-party risk in the current landscape. It is my opinion that regulated, centralized solutions are more likely to achieve product-market fit in the short to medium term. Considering that major liquidity in DeFi originates from centralized entities, there's a growing demand for regulated insurance products provided by similar centralized organizations. This approach, while promising, presents unique challenges, and time will reveal its efficacy.

As we close this chapter, I am compelled to express my deepest gratitude for the community's unwavering support. Your trust has been the bedrock of our endeavor, and it's been an honor to share this path with you. Although Solace's journey ends here, the spirit of innovation endures, and I remain optimistic about the future intersections of our paths in this dynamic industry.

For inquiries or further dialogue, you are welcome to connect via our Discord or reach out to me directly on Twitter.

With profound gratitude,

Nikita and the Solace Team.

P.S. Holdr App will remain operational for up to additional 6 months to facilitate the withdrawal of LPs' liquidity.