TL:DR; TokeMak solves for misaligned incentives within LM through providing sustainable liquidity to DeFi by means of an aggregation of LP rewards and the deployment of those rewards by the protocols LDs
As always; this is NOT FINANCIAL ADVICE. This only reflects my own synthesis and understanding of previous work by @Archer_MD_ , @LiquidityWizard , and the team at @TokenReactor.
If I misrepresent anything please feel free to correct me
🅰️ Problem Statement
The demand for liquidity is easily observed throughout the crypto ecosystem. People want to swap between different tokens on varying L1s and L2s and experience/use a variety of protocols
Protocols want liquidity to bring value and usage to their product
🅱️Why current solutions don't work
Currently LM is the main means by which protocols bootstrap liquidity, but that comes with some major issues
I. This inflationary dependency hopes that the underlying asset appreciates enough to offset the inflation
🅱️cont
II. Hyperissuance typically leads to opportunistic dumping thus adding sell pressure to the token
III. When LM incentives dry up, that mercenary TVL leaves in search for better yield removing the source of liquidity you attempted to bootstrap in the first place
1⃣ Enter the reactor
How does TOKE solve this?
TOKE offers a "buy/borrow to bootstrap" model to budding protocols in need of liquidity so they don't have to deal with these token inflation issues
This is the future vision of TOKE, but not necessarily what's happening now
2⃣ The road less traveled
How does TOKE get to the point where it can power the entire DeFi ecosystem with sustainable liquidity?
To understand how we get there you have to understand two key concepts
I. Protocol Controlled Assets
II. The Singularity
2⃣ I. PCA
What is PCA?
PCA are all the assets TOKE, the protocol, owns. E.g. 10K ETH, 5K OHM, 5K SUSHI etc.
How does TOKE get PCA?
TOKE provides single sided liquidity pools, "reactors", for LPs to deposit into to mitigate impermanent loss and earn TOKE
2⃣ I. cont
TOKE stakers, "liquidity directors", then direct TOKE deploy the deposited liquidity to trading markets to earn fees. Those fees are taken by TOKE as PCA
Thus TOKE internalizes LP rewards in trading markets, and externalizes TOKE to LPs who provide liquidity
2⃣ II. The Singularity
Eventually there comes an inflection point where the pool of PCA grows so large that external assets and LP rewards are no longer needed, and TOKE can shut off emissions
It is at this point where TOKE can power the entire DeFi ecosystem with its PCA
3⃣ Whats in it for me?
Broadly there are two core stakeholders to consider, and what's incentivizing them to even interact with TOKE
I. LPs
II. TOKE Stakers (LDs)
3⃣ I. LPs
Why would I want to be an LP?
Depositing into reactor provides a multitude of benefits for LPs. For one, you're still earning yield on your deposits.
It's also convenient and secure, you don't have to worry about which pools to deploy your assets to as TOKE does that
3⃣ I. cont
You're also mitigating impermanent loss as TOKE subsidizes that for you by pulling from PCA and slashing TOKE rewards from stakers
Finally, you're also provided with an abstraction layer from the growing complexity of liquidity provisioning; see UNISWAP V3
3⃣ II. LDs
Why would I want to be an LD?
I get exposure to the underlying price of TOKE, valued as a price per unit of liquidity, and I get to direct the liquidity and earn rewards from the massive pool of TOKEs PCA
I can also direct PCA to support liquidity for my project
3⃣ II. cont
Who could be an LD?
DEXs, DAOs, protocols, VC/Funds, and etc. Anyone who needs accessible liquidity without the hurdles of traditional liquidity bootstrapping incentives wants to be an LD and participate in the TOKE system
4⃣ Bonus round
There are a few common questions one might ask that I'll try to answer briefly here
I. What if someone forked TOKE?
Well you'd earn no advantage from that. The crux of the issue is PCA, which you can't fork, so what exactly would be the point of forking
4⃣ cont.
II. How long would it take to reach the singularity?
Fair question, wouldn't it take forever to reach the singularity?
No not necessarily, its possible for TOKE to partner with other protocols with large amounts of PCA (Olympus, Maker, Rari) to speed up the process
4⃣ cont.
III. Will TOKE be limited to the ETH ecoystem?
No! TOKE need not be limited to a singular L1 and in fact its quite easy to imagine TOKEs value proposition being spread across multiple L1s, L2s, and etc.
A multichain TOKE could definitely be possible
4⃣ cont.
IV. What about TOKEs FDV and emissions?
Well that's the point of the singularity. At some point PCA grows large enough where TOKE no longer needs to provide LP rewards. It's very possible that a significant portion of the 100M TOKE is never emitted
5⃣ Conclusion
Not only does TOKE's have product-market fit, it essentially creates a new business model LAAS or liquidity as a service. It also has really cool mech vibes which everyone can enjoy
I'd encourage everyone to visit their website tokemak.xyz and learn!
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TL:DR; TempleDAO is creating the middle ground between insanely speculative tokens and stablecoins by providing a safe haven that reduces volatility, but still provides significant yield on your assets
As always this is NOT FINANCIAL ADVICE, but rather my OWN OPINIONS on TempleDAO and the brilliance of what they're trying to achieve.
I recommend all to DYOR by following their twitter @templedao, joining their discord, and reading their medium posts etc.
🅰️Problem statement
You can broadly sort crypto assets into two buckets
Protocol tokens and stablecoins (e.g. TOKE and USDC)
These two extremes represent for the former an extremely volatile asset and the latter an asset that, pegged to USD, loses real value every year
🧵On composability and its value in DeFi for @scribeDAO
TL:DR; Composability allows for the integration of multiple protocols into increasingly innovative and complex products
I noticed a lot of people throw the word composability around a lot, and non-crypto natives probably don't know what that means and why its important especially considering the rise of L2s
I'll try my best to explain the issue in the next few tweets
1⃣ What is composability?
The capability for applications and protocols to leverage each others code in a permissionless manner creating synergistic effects
Essentially one can pick and choose DeFi apps to amalgamate forming brand new financial products
🧵On the importance of community and the pitfalls of progressive decentralization for @scribeDAO
TL:DR; Protocols should focus on building a fiercely loyal community first and let product-market fit come later organically through co-design with stakeholders
Unfortunately I cannot find the original author on twitter, but if anyone knows him/her/they please tag below!
1⃣ Pursuance of product market fit
Crypto can seem analogous to startups and thereby the focus of protocols tends to default to product-market fit as they progressively decentralize over time
Thus protocols sometimes focus on building for the community and not with them
Success tokens, a Series B investment for VCs to invest in DAOs. For @scribeDAO
TL:DR; Success tokens are a means for VCs to receive strong upside exposure to the protocol without receiving tokens at a discount which might disappoint the community
After a token has launched a VC can't get the token at the pre-sale price anymore, but projects still want access to VC capital and expertise as they can be huge value adds for the projects growth and success
How do you value DeFi protocols? How can I tell if I'm making a good investment? (NOT FINANCIAL ADVICE)
Well, you can value DeFi the way you'd typically value a growth-stage startup. Just use growth projections of a tokens value flow to develop a valuation framework.
2/n
Let's look at MKR as an example.
1⃣ MKR is a platform for taking collateralized loans on crypto
2⃣ The value comes from not losing exposure to price appreciation in assets (i.e. selling or staking ETH) while gaining liquidity for leverage or daily use
3/n