crab notes 🦀 lobsterdao
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A collection of opinions and narratives about crypto and startups. No investment or financial advice. Managed by Rising Vista FZE LLC. All info about lobsterdao is in their channels, see @lobsterdao.
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Ethereum Twitter fights of the past week(s) got me to write on a broader topic... Did anyone ask for it? Absolutely not! But as an online couch warrior myself, I couldn't pass by. Hope you like it!
✨ 𝘾𝙊𝙈𝙈𝙐𝙉𝙄𝘾𝘼𝙏𝙄𝙊𝙉𝙎 & 𝘽𝙍𝘼𝙉𝘿: 1-9-90 ✨
https://lobsters.substack.com/p/1-9-90-community-and-brand-building
| 2 | Modular Lending / Modular Leverage
Some thoughts about the lending space and modularity:
1. Never work on a lending protocol, perps, or anything involving risk underwriting. It's the most terrible and difficult segment to go into. It's not rewarding, and you can't ever sleep or go on vacation. Wouldn't wish this to anyone.
2. Read point (1) again, don't do it.
🫶🫂
Jokes aside, wrote an extensive research piece and outlined the differences among Gearbox, Aave, Morpho, Ajna, and other protocols - in the context of modular leverage / lending. Fluid, Silo, Frax, Curve, and many others have good takes.
PS: this is not a diss at Aave or anyone else; please, no bag fights. There are many chad teams. But if you work on a protocol and believe it has advantages, you need to preach and push it. And the more, the better.
- TLDR is here: https://twitter.com/GearboxProtocol/status/1784987887551046086
- Full piece is here: https://blog.gearbox.fi/gearbox-modular-leverage/ | 7 341 |
| 3 | ❤️🫂 EIGEN FUD clarification, quick questions-answers
1. March 15 was the snapshot. Then what, automatically S2 started? Or currently staked is just dead capital? Not asking for dates, but this is important for stakers and LRTs to know that they are still getting the points. When the snapshot will be over you obviously won't tell, is fine. People just wanna hear it's not a dead hold at the moment.
yes, automatically S2 started
2. Season 1 says 2 phases (I guess claim was more complex to count for some protocols due to the time involved to generate proofs). That's fine, 2 phases are fine. But the way it is worded right now looks like you:
- gave a chunk to direct stakers and LRTs (90%)
- left a tiny chunk to defi, cucking pendle and many others (10%)
2.1 Is this true or not? If this is true, the value per point is different on different avenues? And there are different points basically? And defi integrations got rekt?
2.2 I assume not. So is it that just pendle+defi ended up being around roughly 10% so you decided to deal with the complex defi later alltogether, while all the points are born equal? And the value per point is the same after all?
yes, it was very difficult to parse the end-user from many protocols, especially complicated ones like Pendle. the foundation was able to get the total points/TVL restaked through these complex protocols, and this resulted in ~10% -- so that is not arbitrary. However, to actually get to the right end user the right amount of tokens, will take time and working with these complex protocols directly.
`the intention is for every one to be treated equally, and this is an effort to do so.
So yes, you are correct on 2.2
3. so tldr is: pendle + some complex non-LRT defi... all ended up being ~10% so you all put them aside. otherwise points were treated equally and there are no different tiers? there are no different tiers, all points are the same = correct?
correct, except there are considerations like if you staked longer you got boost (loyalty), etc. but intention is if you went through pendle you are treated like any other user.
4. the boost might confuse people, does that affect number of points?
cause people gonna ask
well, points already kind of reflects the boost
because if you were early, you got more points early on
points do not EXACTLY reflect token allocations no, but it should map pretty closely | 13 234 |
| 4 | Did a deep dive on Epicenter about DeFi resurgence and how Gearbox reimagines composable leverage / onchain credit. No trust scores, only math! Honored and proud to have been on Epicenter with Meher Roy, thanks to the Epicenter and Chorus One teams 🫂
- or a YouTube link https://youtu.be/webnsH2pS0k?si=68IN_FtrrHW4VeuW
- Twitter post https://twitter.com/epicenterbtc/status/1771457019200827593
PS: the modularity and other concepts you see these days with lending-like protocols are not exactly new. Every second protocol was like that already a year ago. It’s just that, unlike infra, DeFi is (sadly) tangible, hence you can’t just get away with narratives. So where narratives stop and UX begins, the former quickly falls as there is need to somewhat handhold users or offload the problem onto another team. At the end of the day, modularity is there and will be there, but the UX is an even bigger obstacle. See Aave, leading by example.
Also did a recording with Joel and Saurabh a few months back that they only released now. That one was on communities, narratives, longevite… and us being skeptical on Solana just before it did a 20x lmao. Midwit fucks, truly. Check that one in here:
- https://www.decentralised.co/p/podcast-episode-ivangbi-from-lobsterdao | 6 046 |
| 5 | [gearbox shill]
After months-years of work, it is hitting escape velocity… I mean devs are not being able to escape their dungenons any time soon, but integrations are 👀 Did an update with all the details in a twitter post, easier to read there.
Come farm passively at 10%+ (and growing) or leverage farm points like a proper degen!
🤖 https://x.com/ivangbi_/status/1759926099981525264 | 3 208 |
| 6 | We did a deeeeeep interview about EigenLayer on Defiant News with Alp, and chads Tina & Teddy 🔥 Basically a one hour panel on restaking security implications, AVS use cases, product viability, and some DA stuff... Watch it! youtu.be/xev-eZEWCnA
PS: ivangbi and alp started doing these bi-weekly deep dives on different hot topics on Defiant. The idea is to not just suck up to founders and let them shill, but to try grilling them and asking genuine questions which a token holder / researcher would have. For example, in this episode we tried to distill the fancy AVS narrative to early-infra-shitcoins launch platform. That doesn’t anyhow diminish the research and the technology, but helps view things in a more friendly way. Hopefully it’s interesting, enjoy! | 7 977 |
| 7 |  No more waiting, Gearbox PURE is now live in alpha testing! 🍀
Leverage trade with the deepest liquidity of Uniswap, Curve, and others. No funding rates. No perps. Only the most PURE stuff...
⚙️🧰 https://pure.gearbox.fi
sound on, get a taste of PURE
See the details on PURE margin trading features: https://blog.gearbox.fi/gearbox-pure-margin-trade-on-uniswap-and-dexes/
We are back to great videos, so-so product, amazing code spree! Just kidding, V3 is 80% LIVE now 🔥 Farms to follow in January... and more to follow after! L2s, integrations, gearbots, rates, staking etc. Big plans, small pipis. Anyway, click around, lend, trade, and feel free to share with frens and enemies. | 9 287 |
| 8 | DId a looooong one with Alp and Jack from Defiant back in Istanbul. We went through a lot of things on lobsterdao ethics and alignmeeeent - to different things like hardware wallets and adoption mental gymnastics - to Gearbox vision and DeFi. Check it out! It has topics and timestamps, so you can click around 📹 https://youtu.be/5m2lzTj-PVk?si=OqU97i-wL7RZN2qa | 2 723 |
| 9 | Did a looong SEND IT podcast with amplice on all things DeFi and mostly about @GearboxProtocol journey: from 0xmikko coding weird shit, to forcing me into wagecucking, to V1 DAO... and now V3. Thank u for having us 💕
@leviathan_news, DAdvisor, Wajahat, and Samuel 🤖
PS: I never said I am a genius, Sam did me dirty in this slip, lawsuit inc mfka.
🎞 https://youtu.be/BwdHKnFTScU | 2 446 |
| 10 | Here's a short clip of our interview with @ivangbi from the latest SEND IT episode. Don't sue us please. | 153 |
| 11 | 👩⚖️ [Quick Digest] Are you doing it all wrong? For founders & teams.
GM! As bear continues and all user metrics fall, it's hard to keep yourself both motivated and convinced. User metrics down, governance activity down, volumes down, your bonuses down, your industry prospectives down - it's all falling… Is it fine?!
We often hear: Devs, do something! - but if we get asked “what would you do in our place?” - we immediately understand that we are wrong. Sometimes a dev can’t do anything, or rather, a dev is already doing everything. You are just asking for oranges from an apple tree.
💡 And the decision-making cycle here is different from the one of an investor. For investors, you are supposed to max bid at the bottom. Basically to spend more in bear than in bull. That’s your max opportunity period when you consider ventures investing vs value investing. For teams, it’s often the opposite. Teams are more like value investing cycles, even if their VCs force them to gamble with their lives. Teams’ max opportunity window is staying alive to hit the critical point, whereas timing the bear isn’t actually that important. Or is it?
Anyway, check out https://twitter.com/ivangbi_/status/1693165661361692778 and discuss in @lobsters_chat 🦞 And GLHF PnD-ing your friends on a weekend, let’s see how long it survives. | 1 692 |
| 12 | 🕵️♀️ [On-chain Sleuth] CRV 🛍
Just wow! Demand from the OGs and some protocols is crazy… So far, Mich bagged (and used it all to repay debt) about ~$44M, getting rid of ~110M CRV.
- Dune board: https://dune.com/spotonchain/crv-founder-sold-crv-via-otc
- Mich debank profile: https://debank.com/profile/0x7a16ff8270133f063aab6c9977183d9e72835428/history
NOTE: SpotOnChain tracks USDT only, hence it shows only $22M. But some sent Frax, some sent USDC… As such, if you look at the total CRV sent though, the amount now is $44M USD. There could be some discrepancies, but anyway it gives a roughly accurate picture.
Look at the post we did in June, overall changes are:
👻 Aave: $63M debt in stables -> $20M repaid now -> $43M debt now
🧙 Abracadabra: $20M debt in stables -> $15M repaid now -> $5M debt now
⚫️ Fraxlend: $16M debt in stables -> $8M repaid now -> $9M debt now
↔️ Inverse: $3M debt in stables -> bigger debt now, $9M 👀
Fraxlend design forced his hand first, so the first OTCs went into repaying it. Then he split between Aave and MIM, favouring MIM despite larger debt in Aave. Inverse is now more indebted in CRV, but that doesn’t seem to be a concern now (?)
1️⃣ Whether it was Black Thursday and systemic or not… A game of musical chairs between the protocols?
First of all… There was nothing systemic here. Liquidity would have shifted elsewhere. There was no risk for DeFi (fk u coindesk, larping snakes). 🖕 Liquidations would have happened, some protocols would have lost, but bad debt wouldn’t be so high. Aave would somehow pay it back with reserves or stkAAVE. Meanwhile, Fraxlend showed the strength of its design without even any external votes. MIM understood the situation and ran to save its users with more proactive counter votes. Good! At the end of the day, protocols have to secure their assets and ensure no bad debt, even if it makes churning one main user as a result. That is, if they are not dishonest…
2️⃣ Governance is fugazi or not. How do we fix it?
Immediately, people started blaming governance. Flexibility=control... Should MIM be able to force the hand that fast? They acted in the interest of their users though. What about Aave V2? There are many questions here, because while many say bad debt would have been limited, don’t rush to make bad decisions (Marc) - you can’t argue that it WAS WEIRD how Gauntlet proposals and everyone else have been ignored. Maybe no malice, maybe no conflict of interest per se - sure, but definitely overlooking the situation. And now they want to buy CRV, at least kudos for making it via a treasury vote and not just deciding to buy (on-chain governance benefits). No diss on Aave here, V3 looks great, but one can’t overlook the debt of $60M+ on a medium-tail asset with worsening liquidity and think it’s ok. Blz don't beat me up ❤️
- Also, made a thread on governance: https://twitter.com/ivangbi_/status/1687087857859719168
- A thread on different models tradeoffs: https://twitter.com/apeir99n/status/1687095911024136192
3️⃣ Founders are evil and rich? Is Mich an evil abuser lol?
Mich didn’t want to sell (majority in any case) and had put them as collateral instead. Now he is forced to sell lower, which one could say was a sifu move - but Mich built much more for the space than the trading shady fker. It might have been an oversight from our in-house-physicist, but it is what it is. Currently, he is taking an L compared to if he sold it before - and that is a fact.
But again: There was nothing systemic here. DeFi is not dead 🤕 Liquidity would have shifted elsewhere. Balancer has bribes. Uniswap has liquidity. Everything was ok from the start if you accept the fall of some and the rise of others. It’s cool to see some OGs come to the rescue, but again - that is NOT an industry rescue, it’s a rescue of their favorite. A choice, not a necessity.
PS: love both Curve and Aave, no diss on either. Simply presenting different sides to the debate. Cheers 🖖 | 2 438 |
| 13 | 👩⚖️ [Daily Digest] $0.4️⃣ CRV
Have you slept for more than 6 hours today? Well, good luck catching up… There is a chance you are rekt!
First of all, the “Vyper hack”. On Sunday 30 July, several hack attacks drained funds worth about $70 million on Curve Finance. CRV/ETH pool, alETH/ETH pool, msETH/ETH pool, pETH/ETH pool. Details of the hack are in this tweet. Some of the MEV and whitehat operations saved some funds, see the full list by Tay.
And this leads us to the next point… the CRV situation. Funny fact, which everyone always knew, but still LOL: Michael owns about 50% of all CRV circulating and all of that is collateral on lending protocols... Talk about capital efficiency.
📓 we wrote about CRV and Michael’s positions a few weeks ago on June 14 (scroll up). In fact, the topic itself was discussed in Aave for months! Even during Avi fiasco-manipulation back last year… Yet nothing was done, because key players seem to believe that there is no need to force the hand. Well, it was almost forced last night…
With a chunk of CRV over $30M worth getting into hacker’s hands - one gets the question of “what if… cascading liquidations”. For your reference, CRV would need to drop to $0.40 & below. And with three major players having debt: Aave, Abra, and Frax - the question is, who carries the torch. Because it’s quite likely that one would be made whole, but that could evaporate most of the capital on the buy (bid) side for CRV. So it's less about liquidations even (again, Michael already holds 50% of circulating, and that 50% can't be borrowed by others to short) - but it's more about the quality of the collateral and whether the debt will ever be repaid (?)
Anyway. By design (see Sam’s reply in lobsterdao chat), Frax was the first one to force Michael’s hand, as the debt would increasingly get worse and worse. As such, for the next few hours, Michael kept dumping CRV OTC engaged in highly sophisticated OTC deals trying to secure some funds to repay some of the positions.
💡 the terms seem to have been $0.40 and 3-6 months lockup. But the lockup is not anyhow enforced on-chain, as you see via the links and receipts of tokens, no vesting contracts are deployed. Source: etherscan lol. There doesn't seem to be any other off-chain agreements based on the claims of the buyers themselves.
The buyers haven’t been VC funds or some names. In fact, Evgeny of Wintermute skeptically referred to these deals. Saviors of the day, or rather, Michael’s house (note: no, the house is fine) have been:
- 5M CRV ($2M USD) to Tron founder Justin Sun, who already plans to brr yields for his muh RWA protocol (likely putting his own other assets and re-collateralizing them… smh, let’s see how this goes).
- 4.25M CRV to DCFGod
- 3.75M CRV to scammer machi Jeffrey Huang
- 2.5M CRV to crypto investors DWF Labs
- 2.5M CRV to DeFi project Cream Finance
- etc. $11M+ plus. See his debank profile.
It’s a bottom of the barrel mostly, pretty eh. Justin already planning some schemes, although he bought it fair and square, why not… But back when repayments started happening, prices went from $0.50 back to $0.60 - as UK researchers say “not seen in existence since last week” kek.
😮💨 Adam and fudzy have been violently expecting fireworks, but some of their points make sense: ok, no cascade now, but where will demand come from for the other CRV part? It’s semi-liquid shitcoin now? Yes and no. It’s quite astonishing how so far it worked out, and there is still $10M+ demand outstanding from even some founder DMs I got willing to buy being a half of that as is. Fascinating, weird, and… almost wholesome. But weird.
⚖️ Some other news: Multichain funds seized by CCP seem to have indeed been seized by CCP. And worldcoin eyes being sold, wow surprise lol… but still allegedly. Stay safu. DeFi is fine. There is no real Black Thursday here for the whole industry. Yes it would be a big event, but likely the holes would be mostly covered. Cheers. | 2 411 |
| 14 | 🧠 [Long Research]: GiveMeYourEye 👁
Sooo, ethCC was fun! Was great to see so many of you, incels, still surviving. Will do another post with some thoughts, but let’s dive into the hotter topic of this week: worldcoin. There is so much mystery (untransparency) around it, that it’s a big discussion topic.
Vitalik posted his piece in the same hour as the shitcoin trading began, which is very unusual of him, but he simply wanted to get more attention when the hype was at peak. He, as a visionary reptile thinker, likes all new things. Naturally, he wanted to research it and give an opinion:
🔴 Privacy concerns: Worldcoin's reliance on iris scanning raises significant privacy issues, as Buterin pointed out. The database linked to the iris scans could potentially reveal sensitive information, posing a risk to individuals' privacy and security.
🔴 Accessibility issues: Vitalik also raised concerns about accessibility, noting that participants need physical access to a Worldcoin Orb, limiting the project's reach. Without widespread availability of these Orbs, there's a risk of favoring urban centers and creating distribution imbalances.
🔴 Centralization risks: Another point raised by Buterin was the potential for centralization. The inability to verify the integrity of Worldcoin's Orb hardware construction leaves room for backdoors, which could compromise the system's decentralization efforts.
🔴 Security challenges: Buterin identified security risks, including phone hacking, coerced iris scanning, and fraudulent use of identities, all of which could jeopardize the Worldcoin system's integrity. Is a good read: https://vitalik.eth.limo/general/2023/07/24/biometric.html.
👀 But from here, it gets worse…
There is the “tech" and there is the optics & token distribution & marketing. While the tech could be interesting to some extent, the rest is done in a scammy way, resembling MLM pyramids and evil shit. And that can be seen by the observers at orbs and the token metrics they made. Massive L.
Here are a few clear ways where even tech supporters can't stop themselves from puking:
🤮 Liquid supply is approx 1% whereas investors and team are at about 25%. From the liquid supply today, 3x of the community (airdrop size) is in the hands of market makers. It's a silly offer worldcoin got into for the sake of washtrading and hyping up their MLM. Check two good threads here, objective view on the market maker ponzi they are doing: https://twitter.com/AriDavidPaul/status/1683627646633013249. Yet you probably can't short though, because MMs hold the supply and can do whatever. Long-term GCR style, this is a disaster of course.
👁🗨 Eye scanning is promoted by vendors engaged in MLM. Even the early affiliated videos promoted “we scan eyes of poor people to give them airdrop" type of vibes. See their founding member older post. Upon completing the process, a staff member assured me my tokens would unlock soon and hurried off to help a Mandarin-speaking older couple that had stumbled in. - check the DL News article on how some of the experiences are. And just look at the video Altman posted himself, dystopian af: https://twitter.com/ivangbi_/status/1684306782078869505/photo/1.
Anyway, some knuckleheads say that this can really push crypto further to adoption, but at what cost? If you want to have adoption no matter the cost, might start throwing money at RWA, scan your eyes, suck off SBF, and do ponzis… Subjective. Unclear. Gross. But decide for yourself!
As a fun note though, some sers made a buttcoin whitepaper version of this: https://twitter.com/OfficialESC/status/1683019497291038722. Who knows, we might see more of this physical-interaction-crap pop up. We love KYC & AML, and it's a totally helpful thing, right?
If you want to continue discussing this stuff, check conversations in lobsterdao first, to not post the same things again. And if you are choosing a movie - check "Minority Report" or “Black Mirror” 🖖 FIN. | 2 346 |
| 15 | 🧠 3/3
2️⃣ No-RWA (decentralized) stablecoins
This is the other side of the spectrum. My fellow truck-gun-ranch-BBQ-decentralization-VPN-alienhating mongols. Just kidding. Well, here you have varying degrees of fairy tales being spoonfed to you. Choose what you like:
- decentralized collaterals, no governance, centralized third-party oracle
- decentralized collaterals, active governance, anon team members
- decentralized collaterals, centralized governance, ddoxed team members
- centralized collaterals, active decentralized governance, decentralized oracles
Again, these are not bad! It’s just about what you are afraid of most, because there is no universal medicine. Liquity is like the pinnacle of our achievements so far if RAI-HAI weren’t so design-wise unusable. Then you have a bunch of their forks & spoons which came out recently like Lybra & later Prisma (scroll 2 posts above for a cool LSDfi post). And a bunch of other ice cream flavours which are all based on milk anyway.
3️⃣ Algo jungle yield stables
This goes even deeper. These are not even stables per se, they are stable-pegged assets made for leveraging, looping collaterals, and doing crazy shit. They are not intended or ever been used for payments. They are mathematical fun coins basically. There are a ton of cool things here, but they are basically destined to stay relatively small (while still maybe in $1B size) as they can’t tap into real adoption narratives.
- crvUSD: very cool, very new, but centralized liquidity collaterals (which is ok or not?)
- FRAX: very innovative, very agile, but the question is the purpose now (apart from farming?)
- MIM: was very cool and very risky, now more safe, but same questions apply
Plus all the other stables that have not been mentioned above, ikyk. Again, they are not bad, but they are neither super safe nor are they super regulated. They might like their niche and can spin up other products later, as they have. I bet teams ask themselves the same, And it’s fine! Keep pushing for what you believe in, keep iterating, I am just talking from the user perspective as a stable enthusiast myself. Love you ❤️
Don’t forget, this is all subjective stuff! Feel free to discuss and debate in @lobsters_chat & kingdom.
That’s all for today. Stay sane, stay safu, and don’t sell your stables at $0.97. 🫡
Some cool sources on stablecoins:
- https://defillama.com/stablecoins
- https://stablecoins.wtf/
- https://dune.com/steakhouse/stablecoins
- https://dune.com/KARTOD/stablecoins-overview | 2 024 |
| 16 | 🧠 2/3
— Case 2: imagine your stablecoin has traction and you want it to grow.
You want the supply to grow, because your relevance & mansion money come from taking a % off that pie.
You look into other non-ETH collaterals. It's WBTC and that's it. Literally, that's it! And what is the competition with stability fees (what protocol makes $$) comparing with other competitors? Wow... You realize, you can't make much money here. You can neither charge more nor can you grow more than X% of the collateral. Why? Take ETH. About 10%+ lost their access, a half doesn't want to ever take any risk at all and simply holds. Another part doesn't want stablecoins but just wants staking. And you end up with MAX possible penetration of low-low double digits at best. That's what the case for SAI and is the case for stables that have multicollaterals (where TAM due to their FDVs & liquidity are 1000x smaller).
This is even before we get into the fact that stability of a $1 peg and depth of the market are not cheap either. You need to pay for that in some way. End of the day, you realize that within crypto assets, you can't grow much if your ambitions are big. Surely, you can wait for $ETH to be $10K+ in which case 10% penetration is fine, but again, your growth is not in your hands = bad. Naturally, you look into other markets…
That's when you discover that "muh gold market and real estate market are x100 bigger and derivatives are x10000 bigger”… Jackpot?!
1️⃣ Fiatcoin-stablecoins & RWA
Enter RWA. Real-World Assets. Or rather, offc-chain assets. Your company equity, factoring), your house equity, gold, debt someone owes you... anything. The TAM of this stuff is literally $trillions of dollars bigger. And in many cases, the user base is prepared to pay good % as fees compared to crypto natives!
Maple, Ondo, Goldfinch, Florence, Centrifuge… there are quite a few RWA related protocols. But when you tell crypto natives that their money goes off-chain... “Gfy bro”, right? So an easier path for them is to (1) either hide those actions behind making a stablecoin (2) ask other stablecoins and lending protocol to print-allow their assets as collaterals. This is already happening, it will happen more, because there is a lot of $$.
See a decent introductory thread: https://twitter.com/jackchong_jc/status/1574745695654797312
See this: https://makerburn.com/#/rundown. Holy fuck, right? DAI has so many risks and so many attack vectors now… Yes, FUD.
DAI is the perfect example of "started with ethos and moving away from it". But aren't we all? It has a token, it wants $$, it must make relevant choices as a business. Ledger - same case somewhat. It's undefeated truth that You Either Die A Hero, Or You Live Long Enough To See Yourself Become The Villain. We don't like seeing it, but money flows dictate how protocols will shape their future. And unless you are a cyberpunk (none of us are, let's be honest), the choice is clear and simple. But then... be careful sitting on both chairs. Aave is also doing this, as an obvious decision.
Mental gymnastics must be an Olympics sport, amiright?
In the post above, we already articulated why so far USDC has fumbled. We also discussed USDT winning and its clear-unclear management of assets backing. Who else is here? There is half-dismantled BUSD from CZ which is lowkey being pressured to fade out, and… TUSD. TUSD was acquired by Justin Sun & Co (not directly, but it all seems close). See a few threads here & here on the recent FUD. There are no clear-clear arguments, but (1) huge unknown growth into x2+ supply (2) related to Justin’s Co (3) pushed via Binance no-fees recently… all seem sus. You decide though.
Apart from USDT, the rest are really fumbling of their own volition. Look at me, Oxford dictionary. | 1 529 |
| 17 | 🧠 [Long Research] Topic: Stablecoin TAM, RWA poison and The Ever-Dying Ethos 3 parts 😅
Continuing the post above… The assumptions-ideas below are debatable for sure, it's made as food for thought! The decisions teams make depend on where they expect the market and the money to be. The security of the stablecoins due to their backing depends on that directly.
TAM drives stablecoins 💳
Total Addressable Market. The bigger it is, the better it is. Well, usually. Unless you read Zero to One by Thiel who argues that uncrowded small markets are a better starting point. Back to the point. Imagine you want to sell bikinis: you have billions of people being able to buy, but also big competition. However, you can buy ads & traffic to your store -> some % of that lands on it -> some % of that buys = conversion. As such, if your starting market is big, you can get to at least some size. And then it’s competition from thereon, but that’s a topic for another day.
On the other hand, if your market is just 1,000 people… You can maybe only find 100 to speak to, 10 will find the time to actually speak, and only 1 will buy. Sucks, right? Well, that’s crypto products for you. A tiny idustry unless we are talking of General Partner & lawyer bonuses where 1 whale is enough. It isn’t the bull case for stablecoins though, stablecoins want to have network effects (see here).
How is that relevant, ser? Is it even true?
Assumption-statement that stablecoins go by 📐
Stablecoins have strong network effects. The more people use the same stable, the better: it helps exchange value by sending to one another w/o swapping <> this stable has the highest liquidity & depth <> this stable is accepted as a means of payment and salaries in many places <> this stable is listed on many exchanges. These are kinda circular meaning "the rich get richer”.
— Case 1: imagine you are making a stablecoin.
Starting with centralized collaterals is only possible if someone huge stands behind you: you need a ton of trust+money and more than that, a lot of people willing to KYC and issue supply, a bunch of centralized exchanges... you need a ton of resources to just start off basically. It's like starting a bank. To start one, you need to basically be rich already or you can't lift it off.
So, likely not your situation. You need to derive trust from either interesting mechanics, decentralized collaterals, angels, open transparent books, and so on. You need to "become big enough" before users and whales are ok with you fucking around more. As such, anything that's not rich & huge from the start - has to begin as a more decentralized version, naturally speaking.
💡In a bull market, many stables lift off high enough into 9figs ($100M)+ with this approach. Usually, nobody hates projects and stablecoins at this stage of the game. The problems start after.
A perfect example of that is MakerDAO’s DAI in its SAI v1 version which grew "good enough” and then… | 1 689 |
| 18 | Tether could earn more than BlackRock this year…
Ha, baited! Well, it's true though. Ans yes, it's the BlackRock that has $9 trillion in AUM. Tether’s profits surpassed Blackrock’s by 27% in Q1. TLDR 💡 everyone is either too small, or big but dumb & fumbling. Meanwhile, Tether is winning.
🧠 [Long Research] Topic: other stablecoins fumbling the bag?
Tether reported $1.48 billion of net profit for the first quarter — more than double its Q4 2022 net profit ($700m). At the same time, BlackRock reported adjusted net income of $1.16bn in the first quarter of 2023 (which is 200 million less than Q4 2022).
Where does the $$ for centralized stablecoin issuers come from?
It comes from treasuries & various lending they engage in. Don't forget, interest rates on USD itself are ~5% now! While YOU use and hold that stable green shitcoin in metaverse, Tether makes real money on you. Keep this in mind for a second, it will be important later.
Tether truthers and USDT reserves
For anyone who says "all their reserves held in BTC, along with it and the profits have increased" - company also said that most of its reserves were held in cash and cash equivalents, with the majority “invested in U.S. Treasury Bills.” Only 1.8% was held in Bitcoin.
BUT! 🚫 Not to sound like tether truthers (who are often right in facts, but wrong in reality) - Tether isn't all that safe. Its profits clearly illustrate that it's NOT 90%+ short-dated treasuries like Circle USDC has. On the contrary, Tether engages in a bunch of private lending, credit, and all other volatile stuff to make money. That is how it can demonstrate abnormal profits, more than if 90% of its reserves were in treasuries. Paolo might say it's all good and safe collateral, but we know how these things can go: creditors, different entities, cascading liquidations, etc.
March exposing the idiots in all of us
During the March crash of USDC, for over 2 days, everyone was in limbo. People were scared, and Circle made no promises or moves to calm anyone down. Mostly because they couldn't do it due to regulatory concerns (and by not having any control over that situation).
Anyway, Circle failed its users. While that's proper behavior, tether always does the opposite: says it's all ok and calms people down. And even though we all pretend to love decentralization and transparency, in times of panic - users appreciated stories and froth... and since then, as a result, USDC token net outflows have surpassed $10 billion since, most of which moved to Tether. USDC supply has fallen from $43B to $27B which is a -37% loss. USDT, on the other hand, went from $70B to $80B, an increase of almost 20% in the same time.
If we talk about the market as a whole, the Total Stablecoins Market Cap is $128.62b. Of which:
- USDT: $83.18b (65.4%) 😟 winning
- USDC: $28.22b (21.9%): fumbling
- DAI: $4.44b (3.4%): fumbling
- BUSD & TUSD: $4.26b & $2.97B: fumbling
I sold a big chunk of USDC at $0.97, put it in treausires, and almost got frozen. GG best trader!
Re-prioritization of stablecoin choices
The March situation and bear market brought out the extremes in people. Some just ignored the non-crypto risks and went into USDT. Some bought LUSD. A bunch of Liquity forks emerged too powered by LSDfi (see the above Crab Notes post). Things got more polarized, basically. The distinction between the “I am a fed” and “Destroy governments” got more schizo. And only MakerDAO DAI trying to sit on both chairs at the same time…
While DAI remains the leader in non-fiat stablecoins, its allegiance has long been shifting to the centralized party. They are keeping up stETH as major collateral and trying to fix the USDC PSM situation, but the Endgame plan fully targets… RWA? That’s something for next time! Stay tuned 👀
Some cool sources on stablecoins:
- https://stablecoins.wtf/
- https://dune.com/steakhouse/stablecoins
- https://dune.com/KARTOD/stablecoins-overview
PS: the pic below doesn't track other chains, whereas Tron has a lot of USDT. So, it's even "worse". | 2 378 |
| 19 | 🧠 [Long Research] Topic: LSD… and LSDfi is tiny 😮
Liquid Staked ETH is being put into every hole... What’s your favorite hole?
1️⃣ Overall size of staked ETH and some context
It's a bit nuanced when it comes to stats on this topic: do you count staking by exchanges in the overall number? Because if you count Coinbase and its cbETH (staking is not siloed within an exchange since there is a derivative) - do you then exclude Huobi which doesn't have a derivative? Yes…
Roughly speaking, the total size of staked ETH itself is 20M ETH or ~$40B worth or ~16% of total ETH supply issued to date. See hildobby's dune and Rated Network's explorer: the latter also shows client diversity, exit queue, and other more sophisticated stats. From that: Lido takes about 33%, followed by Coinbase at 10% and Binance at 5%, with Kraken at 3% each. Anyway, about 30% is undefined, and about 15% is staking pools.
2️⃣ Staked ETH stats via liquid derivative protocols
Back to what matters to us... about a third (or rather 35%) is LSDs or ~20B worth or ~8% of total ETH supply. From those, 75% is Lido; with Rocketpool at 8%, and Frax at 2%. So, Lido is winning by far and majorly, without stopping. So, how much of that is gambling? Meaning, LSDfi?
3️⃣🗞 LSDfi = putting those LSDs work… issue a stablecoin, leverage via ETH, and so on.
So, how many engage in that? Start with this thread. It is incomplete, but anyway, what do you count as LSDfi? Probably, anything that has stETH as collateral or makes yields with the use of that? Then it would even be good dinosaurs like Yearn and Instadapp. As well as Gearbox, Alchemix, and so on. The latest ones people shilled (for no good reason, apart from being more new & fresh) are:
- MakerDAO (wstETH specific collateral) ~$2B
- Lybra (Liquity fork/spoon) ~$190M
- Curve (crvUSD specific collateral) ± $60M see DeFiLlama
- Alchemix (stableocin) ~$25M see DeFiLlama
- Gearbox (leverage) ~$12M for LSDfi specifically
- Instadapp, Indexcoop, Yearn & other known protocols + Raft ($60M), Gravita (Liquity fork), Pendle's product, etc.
💡 A lot of these - are stablecoins. Partly the reason is that ETH borrow rate has been up (as staking becomes less risky and more adopted). As such, making only like 7-10% ETH-yield on leverage is too low, compared to 20%+ before (in Gearbox, Instadapp, and Aave).
💡💡 As you can see, only a tiny % of LSDs are in LSDfi... just about 2% if we exclude MakerDAO? And MakerDAO is about 10% of the LSDs... As such, the amount of people and capital participating in LSDfi is tiny! That could be due to a few reasons:
1. People stake their ETH now because it's extremely safe. They don’t want risk even for an x2 yield?
2. Industry has shrunk, and people are just not chasing. So they don't mind the risk, they are just lazy.
🆕🔥 The new and upcoming ones to also see are Hedgehog (gas & more on-chain derivatives) and Prisma (Liquity spoon, multicollateral). And of course, EigenLayer, which recently launched. But unlike other newer LSDfi, this one seems to be very academia-research related. So will this swing ETH boomers and large stakers to consider, even if they need to validate oracles or some other restaking service? See Vitalik's post.
Interesting things to look at and consider:
A] “In DPoS staking is native, not fugazi TVL” - source. Debate in @lobsters_chat 😉
B] 💭 Being rich is often frowned upon, especially in staking. Because similar to BTC, if a staking pool were to own 50% (even if optically is 2 entities yet managed by 2 close friends) - is “not good”. So, pools could decide to self-limit. As an act of socialism, but in this case it could be justified. This hasn’t happened yet though, and the vote Lido had didn’t think so. But they improve with V2, more than others!
C] The recent Binance report is shallow but useful to send to friends.
That’s it for today! And be careful with what hole you put your staked ETH into 🕳
Contrary to the hentai you are watching, there ARE wrong holes when it comes to staked ETH. | 2 564 |
| 20 | 🕵️♀️ [On-chain Sleuth] Topic: CRV Whale & Collaterals 💤
The main topic in the world of DeFi in recent days is a story about the liquidity of the CRV token.
PS: many are fans of Michael as he has been 24/7 in community chats since the early NuCypher days in 2017. Chill, open, and communicative. So this post isn't to beat him into the ground (which isn't even possible) but to discuss the latest things related to CRV collateral. We do like M.C.
0x7a16ff is the source of a significant $188M collateral provided on Aave - all in CRV (!) with an open position involving a $64.2 million USDT borrowing. The current liquidity on all DEXes combined (that disregards off-chain demand, options, and any other not currently bidding on-chain seen amounts) - is about $125M, according to DeFiLlama. So is the ratio quite alarming, or do people say so?
Gauntlet (known as math brains) is advising Aave DAO to limit the usage of CRV as collateral. Because what happens is the following: CRV goes down -> 0x7a16ff can add more CRV to support HF (health factor) of their position -> etc... but liquidity is finite! As noted above, $125M now. A simple solution is to simply disallow new loans based off CRV. Not to punish, just stop the domination.
🤔 At the same time, other DAO members of Aave seem to be appalled by this attack on the community member that has violated nothing and just keeps using math as intended: "You have no idea whether he intends to repay the loan. He may be ecstatic to lose 45% of his collateral’s value, as you noted. But on the other hand, he may believe CRV is massively undervalued, and hence would rather borrow against his CRV holdings than sell at these ridiculously low prices. We just don’t know. What we do know is his HF at this point is totally fine.”
At present, HF for this open position is 1.68 = ok. However, if this rate experiences a decline and falls below the critical threshold of 1.00, an automatic liquidation of the collateral will occur. The current liquidation price of the position is $0.374, and $CRV is trading at $0.64 now. Ok? Idk. “AT LEAST KNOWN 24% of all CRVs are on the founder’s wallets, with one of the most locked tokens today (and only 15% free float available to sell). At current AMM liquidity, you literally cannot get the price down low enough.” - says threadman Adam.
Again though, this post isn't to find someone guilty or blame - the fact is, oracles & collaterals are HARD. Mostly because of how often things change, like liquidity and CMC/FDV. In many cases, you don't even know who the largest LPs are for a token - and if they are connected at all. Because if the are connected, it means the market is controlled and thus can be manipulated. It's unlikely that this is the case here, just presenting a theory.
To understand the bigger picture CRV stats at the time of publication:
👻 Aave: $188M CRV collateral -> $63M debt in stables
🧙 Abracadabra: $11M CRV collateral -> $5M debt in stables
⚫️ Fraxlend: $35M CRV collateral -> $16M debt in stables
↔️ Inverse: $7M CRV collateral -> $3M debt in stables
Not nothing, right? The worries aren't totally unbased, because $$ went elsewhere.
💡 Don't shit yourself, loser, watch your own NW!
Well, this stuff is actually pretty relevant to DeFi as a whole. Here is why:
1) Due to potential liquidations, CRV might not have enough liquidity as a token -> bad debt to Aave and other lending protocols
2) CRV going down will mean rewards of many stables especially - will massively drop, causing LPs to exit from them
3) Due to redemptions mechanisms being based off the market liquidity in many cases, due to low liquidity, shit can spiral
4) That could cause some stables to temporarily depeg, further influencing other unrelated collateral positions across DeFi
This is not fractional reserve in any way like FTT, no need to compare to that. However, liquidity crunches are a thing. Unintended shit can happen during the turmoils. Stay safu out there, crabs 🦀 | 2 954 |
