1/ a thread on cross chain liquidity - my talk from last monday at @MessariCrypto's #MainNet2021 but without the leather pants and on-stage tequila shot
what is liquidity and how does it work? liquidity is a measure of market depth - how quickly you can sell and at what price
2/ illiquid assets have poor price discovery and wide spreads, they're difficult to trade in size or trade quickly without having to pay a premium
liquid assets, on the other hand, have tighter spreads and are easier to trade in size at a moment's notice
3/ the workflow of a trade in traditional markets requires the constant moving of data between databases - creating entries and deleting entries forever
tradfi markets are ngmi - execution speed will *always* suffer due to the double spend problem and lack of settlement finality
4/ bitcoin's core innovation is enabling settlement finality for digital money ie data with robust security guarantees
basically, bitcoin was the first to turn computation into money
5/ the bitcoin network prices demand for secure financial transactions in the form of tsxn fees
ethereum prices demand for secure financial computation in the form of gas fees
blockchain networks make financial computation a fungible, priced asset
6/ as such, block space itself is a financial primitive
the demand for block space ie financial computation will persistently exceed supply on all networks
this has been the case since as early as 2017
so we make trade-offs to enable more financial computation on blockchains
7/ for commodities to be tradable, you have to be able to move it around in a cost effective manner - hence the creation of synthetic / paper contracts representing physical commodities
how do we make financial compute liquid and fungible?
8/ ENTER THE L2's
9/ the first experiment started in 2013, when Tether put dollars on the bitcoin blockchain via the Omni Relay protocol, effectively bridging USD liquidity into bitcoin
but not all stablecoins are created equal - tether still makes up 90% of daily crypto dollar velocity
10/ the next experiment was bridging Bitcoin onto Ethereum to be utilized as collateral in various DeFi protocols
nearly 1.5% of bitcoin is now used on Ethereum, but nearly all of this is fully custodial - again, trade-offs!
11/ the current experiment, given the demand for Ethereum block space exceeds its supply, is bridging Ethereum from L1 into L2
in the last two weeks, the TVL of ETH on L2 has grown explonentially
12/ to date, nearly $8 of TVL has been bridged from Ethereum into not only L2's, but also other L1's
in the quest for available and affordable financial compute, all assets are becoming fungible liquidity across all chains
13/ today, 8% of blockchain-based assets are used on other networks
over the next 12 months, i expect this will be over 50%
if you want to bet on this, lmk
14/ what's exciting about this is now anyone, not just boomers in blazers, can be a market maker and supply liquidity
it makes markets absolutely massive. it makes liquidity possible in ways that we've never imagined before. it blows the doors open on the fungibility of assets.
15/ we can put the FUN back in FINANCIAL COMPUTATION
assets are now interoperable across L1 and L2, and can be made liquid and fungible. liquidity itself is becoming a fungible asset.
mind. blown.
15/ and crypto markets are just the beginning.
at @CoinSharesCo, we believe blockchain-based financial computation will eat all markets.
every market will be on-chain, global, and trading 24/7/365
if you wanna chat or are building liquidity focused primitives, DM me. our team at CoinShares would love to talk and see how we can bring liquidity to your network.
17/ i apologize in advance for any typos or conceptual leaps, i made this presentation on a red-eye flight and i'm still wrapping my brain around things
i'm always happy to trade notes, so feel free to DM me if u disagree or if u wanna help me get the framing tighter
/fin
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1/ quick notes and data points from the discussion @kellyjgreer and i had at @PubKey_NYC last night
'tis the season of the most hated rally - bitcoin is ripping and macro folks are not happy about it
jamie dimon and elizabeth warren seem especially mad 😠 max cope incoming
2/ bitcoin pricing is driven by FLOWS
it's tempting to get lost in piles of analysis but as we'll discuss later on, the key to understanding is looking at open positions, trade volume, inflows and outflows
sentiment doesn't matter until it's expressed as a trade
3/ bitcoin is highly reflexive
i had a moment of enlightenment a few years back. i used to believe narrative -> sentiment -> flows -> price but it's really much simpler
price drives action
this is what @saylor $MSTR has perfected. buy, price goes up, follow with narrative
1/ a short summary of a recent talk on silicon, satoshis, and superpowers
power in our world is changing. a decade ago, oil and gas companies and banks ruled markets. now it's tech companies and financialization runs rampant (>100x P/E ratios etc)
2/ as our lives become increasingly digitized, value creation is happening on a new frontier, and a handful of industries and companies are well positioned to capitalize on this shift
3/ this is also impacting the geopolitical landscape. we live in a multipolar world, and power has historically been dependent on the ability of a nation to secure access to natural resources, namely oil
1/ thanks to @farokh and the @RugRadio community for having me on the show today! i enjoyed discussing NFT market structure and why i don't care for utility or roadmaps with my JPEGs 🙅♀️
2/ blog post on NFT market microstructure and how it may evolve over time - don't worry, u will be able to explain market microstructure if u just skim it lightly
bonus: you can collect the post as an NFT if you are so inclined, thanks to @viamirror