🧵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
i.e "Money Legos"
2⃣ An example?
Consider Alchemix
ALCX allows users to place capital into Yearn to earn yield, take a loan out on that capital, and use the yield earned to pay off the principal + interest of the loan
To accomplish this ACLX leverages YFI which leverages COMP and so forth
3⃣ What does this have to do with L2s?
Composability is essential in the creation of new and increasingly innovative/complex financial products like ALCX
In L2s there is still a limited concept of cross-layer communication and interaction making composability impossible
4⃣ Conclusion
In order for the DeFi ecosystem to continue to thrive, develop, and scale alongside L1s composability needs to be present and solved for in L2s
There are a plethora of people working on the problem and soon enough we might see a solution!
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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 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
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
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