Emin Gün Sirer🔺 Profile picture
May 10, 2022 16 tweets 3 min read Read on X
Even fully-collateralized fiat stablecoins have depegged. Even some of the weak algo stablecoins have recovered.

Some thoughts. 🧵👇
I have always said that algo stables are subject to destabilizing bank runs. The only mechanism that can defend against this is a strong, active team that performs open market operations.
My thoughts and takeaways today:

1. We need a decentralized stablecoin. Fiat-backed stables are subject to legal seizure and capture. A decentralized economy needs a decentralized stablecoin whose backing store cannot be frozen or confiscated.
2. There isn't room in the market for a dozen, or half a dozen, or even just two algorithmic stablecoins. This is a market where the biggest one wins and all others lose.
3. If there'll be a decentralized stablecoin that succeeds, it'll be the one with the biggest value and the most battle-tested team.

Let that sink in. It's not a game where johnny-come-lately has a chance.
4. Hope you all can see why you should not touch copycat algo stables issued by purely technical teams. If the team's claim to fame is that they were once interns are Google, they are NGMI. The team that has the best open market operations is the only one that can pull it off.
5. For various regulatory reasons, there's no way a US-based team can succeed at an algo stable. Pretty much only a Korean, Singaporean or Swiss team has the right regulatory environment. All others are ticking time bombs.
6. For the algorithmic side of the stablecoin to work, the underlying chain has to offer high capacity and resilience under load. Few chains have the right mempool, fee and API infra to handle high loads.
7. The space is incredibly resilient. We just weathered a substantial bank run. Had this happened in TradFi, there would have been talk of doom and bailouts galore. One thing we know though, the bankers' bonuses would still be paid.
8. I'm not the least bit surprised by UST's resilience. Remember that every single stablecoin has, at times, depegged, including fully-collateralized fiat-backed stablecoins. All of them that have a real team behind them have bounced back.
9. The bounce back is a great arbitrage opportunity. The dynamic that gives rise to a bank run executes in reverse on the way back.
10. More complex stablecoin designs seem unlikely to be more stable under a bank run. The simpler the mechanism, the easier it is to understand and implement. I can imagine many more complex designs, I can't imagine that any of them would achieve better stability.
12. Every single sovereign currency has also had difficulty maintaining advertised pegs. There isn't much difference between sovereign fiat currencies and algo stablecoins in terms of the challenges faced when defending a peg.
13. Before anyone says "hey, open market operations by a team doesn't seem decentralized," remember that the value proposition here is to create an asset whose backing store is decentralized and can't be confiscated or frozen. A capable team is absolutely essential for this.
14. We all love drama, and it's possible to trade into the drama to eke out small percentage gains while taking on some risks that are hard to anticipate, like CEXes halting trades or deposits or what not. The real fortunes in crypto lie in more straightforward long trades.
Overall, the UST depegging played out exactly as we saw in past historical cases. I'm even more bearish on all copycats, and bullish on UST once the dust settles down.

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More from @el33th4xor

May 21
Ok listen up, there's something cool and novel and interesting happening in crypto that you should know about. Namely:

1. There's a new vertical developing, called SocialFi,

2. The best examples of this vertical are on Avalanche

3. There is a new application that you just have to see that I will link below.
Now, I don't know what your thesis is in crypto, but I think we can all agree that we cannot all get rich trading memecoins between each other all day, and the new L1s are slicing the salami way too thin to pose decent value propositions. So it makes sense to look forward a bit and project where the new growth in the space will take place.
It seems highly likely that crypto will follow the exact same path as all other infrastructure tech, like the Internet and telecom. Remember how the Internet started out with just email, then came "the web," and then suddenly we had all kinds of new verticals (e.g. ecommerce, online games, dating apps, digital health, etc etc). We already saw the same thing happen in crypto, starting with simple, inward oriented verticals such as NFTs, memecoins and the like.
Read 15 tweets
Apr 29
Please don't get taken in by another project that is faster at inventing new terminology than it is at transferring value. That is all.
This is especially true for projects that are trying to adopt technical terminology from the humanities.
Remember "effective altruism"? The silicon valley cover story for stealing everyone's money? The head guy, who was inventing enough highfalutin words per minute to fill a few humanities journals, just had his institute shut down, after Sam used his ideology to power fraud.
Read 9 tweets
Feb 29
1/N After much demand, it's finally here: a proposed roadmap for AvalancheGo, or how to build the future of next-gen blockchain networks by leveraging all the best components of of monolithic and modular designs into one.

Note, this non-exhaustive and requires ACP approvals! Image
2/N The roadmap is divided across three major pillars:

1. Modular programmability: Making the building of permissionless, highly customizable, sovereign chains best-in-class.
2. Monolithic performance: Increasing performance of the monolithic stack to 100K+ tps / chain

... Image
3/N ...

3. System reliability: Improvements to time to finality and overall system reliability.

For modular programmability, it is all about upgrading subnets into powerful, sovereign chains. This includes:

* Sovereign chains (ACP13)
...
Read 7 tweets
Nov 28, 2023
Is the Twitter/X app as buggy for you as it is for me?
1. I see my own tweets twice in my own threads, even though they were posted once. Clear threading error incoming recently posted tweets.
2. Sent messages seem to go into limbo for a while, until they are posted. I tried setting that send-wait period to its lowest setting but there's still a wait period. This is probably why interactions are down -- ever since @elonmusk took over, the app has become laggy.
Read 7 tweets
Nov 12, 2023
1/7 Sound ways to do fee isolation, a quick thread.

There are multiple ways to do fee-isolation on chain. For those that need a refresher, fee isolation is the idea of localizing fees based on some specific restriction that the protocol may want to enforce.
2/7 For example, one thing that can be done is if a smart contract is taking up a lot of traffic, then that smart contract will need to pay more than others.

One form of this is what Solana does. This is my understanding based on the code review (please correct me if I'm wrong).
3/7 Solana has 4 execution cores which process txs in parallel as long as they don't conflict. If they do, they form queues behind the core. The priority fee then executes txs in the order of the priority fee. It is not enforced by chain, just by the block-building heuristic.
Read 7 tweets
Aug 1, 2023
AI is upon us and the tech is accelerating at lightning speed. But AI has a copyright problem that I believe blockchain technology can help solve.
I wrote an op-ed for @Blockworks_ that identifies ways blockchains can provide transparency and fairness for how AI models capture our creativity.

Read it here:
blockworks.co/news/ai-copyri…
While these ideas are in it's infancy, there are ways distributed ledgers can ensure intellectual property rights are preserved, and attribution can still flow back to creators.
Read 4 tweets

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