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
🅰️cont
Common sense would suggest that the risk profile from a basket of just those two types of assets is probably not optimal and not what's right for all crypto market participants
Thereby there is a need for a variety of possibilities between those extremes
🅱️Current solutions
You could use stablecoins (lose value) or derivatives
We already discussed stablecoins, but leveraging derivatives is out of reach for most retail investors as they are priced out from high gas cost and low liquidity in derivative markets
1⃣ Creating the Temple
The goal of TempleDAO is to curate a range of unique investment pools between those extremes to manage risk profiles
Consider it being like an LP at a fund, so investments are managed for you based on desired risk/return profile
2⃣ Discovering faith
Let's consider $TEMPLE, a reflection of the Temple ecosystem and their first token, as a case study on how TempleDAO will provide sophisticated risk strategies by reducing volatility and rewarding long-term stakeholders
3⃣ Understanding faith
$TEMPLE is designed with 3 guiding principles
1. Ecosystem growth benefits holders
2. Protocol reduces volatility and rewards long term holders
3. Intrinsic value always increases and is not diluted (no excessive inflation)
3⃣ cont
To achieve these guiding principles in the token design, there are four mechanisms which $TEMPLE utilizes to create a top-tier risk-management strategy for holders
I. Safe Harvest & intrinsic value
II. Safe premium
III. Bonus offers
IV. Unstake queue & price defend
3⃣ I. Safe Harvest & Intrinsic Value
IV is defined as total reserves / total supply
Safe Harvest is the a mechanism that ensures the IV of $Temple is not diluted
Conceptually, the protocol incentivizes purchase of $TEMPLE from TempleDAO OTC by providing a fixed price
3⃣ I. cont
Purchasing OTC, at a multiple to IV, gives those funds to the DAO thereby increasing reserves
Remembering principle 3, we cannot dilute the IV of $TEMPLE and thus the DAO only mints tokens (increase supply) in proportion to reserves to manage inflation/dilution
3⃣ I. cont
Minting the entire increase in reserves would leave IV flat, and so the entire "harvest" is not given out to maintain increases in IV
With "Safe Harvest" IV continually increases avoiding sell pressure/dilution/volatility from hyperissuance fulfilling all principles
3⃣ II. Safe Premium
Safe premium is a price ceiling on $TEMPLE
As mentioned before, $TEMPLE can be purchased from the DAO at a multiple to IV which will be 3-6x, and so why purchase from an AMM unless it was somehow below that multiple?
This is how the price ceiling is made
3⃣ II. cont
How does the price ceiling fulfill the guiding principles?
This again reinforces OTC, rather than AMM, purchasing increasing reserves to grow the ecosystem, increasing IV sustainably, and managing volatility
3⃣ III. Bonus offers
Bonus offers are simply a mechanism where if Safe Harvest rewards are in excess than additional rewards are offered for some time
This promotes principle 1 by transferring excess growth in the ecosystem to $TEMPLE holders
3⃣ IV. Unstake Queue and Temple Defend
For a given block only a certain amount of $TEMPLE can be unstaked based on a priority queue
Thus Unstake Queue reduces volatilty and excessive runs up or down in price by limiting capital flight from $TEMPLE
3⃣ IV. cont
Temple Defend is a mechanism where if AMM pushes $TEMPLE price too low holders are given a right to buy on an AMM and sell it to TempleDAO at a price near IV
Or you could hold your cheaper $TEMPLE and let it compound
This sets a price floor on $TEMPLE at IV
3⃣ IV cont
Like with the other mechanisms Temple Defend and Unstake Queue ensure that IV never decreases, there is stability in the protocol, and growth is transferred to holders through means of compounding rewards to long-term holders
4⃣ Benefits of prayer
Remember the motto of TempleDAO is sustainable levels of high yield with reduced volatilty
All four mechanisms above ensure that volatility of $TEMPLE is minimized and grows continually at a sustainable pace
This provides the middle ground of risk/return
4⃣ cont.
This is great, but lets spell out why we would want to buy and hold $TEMPLE
1. Underlying price appreciation through continual IV increase/management
2. Reduced volatility through mechanisms
3. Compounded value through staking rewards
4. Access to future products
5⃣ Interpreting faith
Lets answer some glaring questions we may have and consider ancillary benefits that membership to TempleDAO has beyond the risk/reward management value that the initial $TEMPLE toke develops
5⃣ Community
Join the discord in a few minutes your brain will melt from all the trolling. Everyone is engaged in the community and it's very tight knit with great memes
If you can't handle people having some fun at your expense don't join, but I love it
5⃣ Team and values
If you feel like TempleDAO has a very "by the people for the people" vibe you'd be write. The DAO exhibits the ethos of crypto with their attempt to create wealth for the masses
A team of individuals brought together on their own with NO VC funding
Fantastic
5⃣ Why would I want a price ceiling?
Understandably you'd ask the value of a price ceiling on an asset you want to appreciate
Well the price ceiling increases reserves, but also prevent runaway growth/inflation which is what makes TempleDAO a sustainable growth protocol
6⃣ Conclusion
TempleDAO is a community-led initiative providing sustainable risk-adjusted growth that will led to real wealth creation for participants
🧵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
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