Tweet of the week: With our memes combined…
A tad hyperbolic, but Yearn founder Andre Cronje was playing up the theatrics in the series of Tweets and Medium posts the last week about a new AMM protocol whose real innovation is on the tokenomics front.
The new AMM protocol’s token will be an inflationary reward token like CRV, where the token’s value comes from its governance power when it’s staked and locked up for an extended period to control emissions of future rewards (in Curve, the staked token is veCRV). The staking mechanism is borrowed from Olympus DAO’s (3,3) model to optimize the preferences for LPs, token holders, and most importantly, traders. Andre’s critique of the Curve model is that it incentivizes liquidity, but not fees, so the ve(3,3) model differs in one key way: ve(3,3) lockers receive fees only for pools they voted for. This prioritizes fee-generating pools.
Oh and also, locking up a token creates an NFT, which can be traded, because of course.
Andre writes crisply, so it’s easy to read all four of his posts on ve(3,3). It’s a little weird that the ponzinomics (not an insult) are the base of the protocol, rather than a financial activity it’s facilitating. Still, ponzinomics may not be important to assets that are already widely traded but they are to projects looking to bootstrap liquidity, and as Andre points out, those are the real users of AMMs these days.
Here’s another thread breaking it down.
Chart of the Week: Squeeth launch
The first few days of trading for a new financial product Squeeth, which stands for squared ETH and is probably best described as a perpetual option. It builds on the perpetual swap that Bitmex pioneered, where traders could get long/short exposure with no expiry using a funding rate that ensured there was an equal number of longs and shorts. If there are more longs than shorts, then longs pay shorts.
Squeeth uses this model but instead of a cash payment every few hours like Bitmex and other derivative platforms, Squeeth uses in-kind funding so the difference is reflected in the price.
It’s a big brain project concocted by Dave White from Paradigm and implemented by the folks at Opyn. This was the most helpful thread on Squeeth.
Odds and Ends
WSJ: Case against PoolTogether is a DeFi first Link
Arbitrum’s 8 hour downtime post-mortem Link
Synthetix considering launching on other L1’s Link
dYdX unveils plans for v4 Link
US Banks announce plans for new stablecoin Link
Polygon network sees gas price rise due to spam Link
Powell says stablecoins could compete with digital dollar Link
Thoughts and Prognostications
Why the future will be multi-chain but not cross-chain [Vitalik]
WTF is data availability? [Yuan Han Li/Blockchain Capital]
MEV and blockspace market design [Hasu/Flashbots]
Helicopter tokens: A look into Ethereum’s biggest airdrops [Kyle Waters & Nate Maddrey/Coin Metrics]
2021 crypto fundraising report [Dove Metrics]
2021 developer report [Electric Capital]
That’s it! Feedback appreciated. Just hit reply. Written in Brooklyn. ve(3,3) and Squeeth come from opposite ends of the DeFi spectrum, in culture and design.
Dose of DeFi is written by Chris Powers, with help from Denis Suslov and Financial Content Lab. I spend most of my time contributing to DXdao* and benefit financially from it and its products’ success. All content is for informational purposes and is not intended as investment advice.