Ipor intern Profile picture
Feb 5 9 tweets 4 min read
Musing on valuation frameworks and why the duration of cash flow matters 🧵 Image
As the industry matures, the supply of stablecoins is kind of a big deal for crypto.

The market turns against you and interest rates drop as a result of the increased float of stablecoins in the market Image
As expected,

- Borrowers become more sensitive to interest rates
- Lenders become more sensitive to their rate of return

All of a sudden, risk management is kind of a big deal and we need to go back and rethink the fundamental values of the most dominant protocols Image
Liquidity begets liquidity

That's the reason why, as an industry, #DeFi needs a base layer for credit markets

This invisible layer is the largest derivates market (interest rates derivatives) in #TradFi and underpins the debt upon which a yield curve is constructed Image
But there is more to it.

These markets run 24/7 and are auditable and transparent.

There are many ways to skin a cat, but there is a series of tradeoffs that will make that instrument more or less useful, specially for the fixed income market participants
You can split yield-bearing assets into a principal and a yield portion and trade them on an AMM

You can also come up with a vAMM construct that will allow for fixed-takers and variable-takers to interact with each other

...
But what's the issue here?

Liquidity fragmentation and exposure to the actual interest rates that drive market forces

A base layer for credit markets cannot be built on isolation, hence the value of capturing a benchmark rate into a single metric, like the @ipor_io index Image
This single metric is a public good and, at the same time, the center piece of a puzzle built upon money legos

Credit is a catalyst for growth, but what's the value proposition for the next wave of innovation in #DeFi?

Composability and venues to exchange of cash flows Image
You can't expect institutions to enter the markets with "fugazzi" financial acrobatics

Fixed income players call for stability, predictability, and liquidity

And this is the triad that everyone is overlooking

Have a good Sunday!

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More from @ipor_intern

Jan 31
Wish there was a protocol that let you borrow against any asset, used no oracle, and had no governance?

Permissionless, decentralized, and oracle free. Simple as that

Enter @ajnafi 🧵 👇
If Satoshi Nakamoto had designed a decentralized money market, it would likely resemble @ajnafi: a peer-to-peer borrow-lending platform where users do not have to trust external oracles or even care about protocol governance.
Forget about tedious governance forums, unreliable risk assessments, or exposure to oracle manipulation attacks.

From the protocol point of view, if anything can be automated, it will be automated

Once deployed, the protocol remains immutable forever
Read 15 tweets
Jan 27
More people are starting to catch up with the narrative that interest rates swaps and risk management will play a huge role in the upcoming years

But even with this uptick, I have a feeling that not many understand the potential of @ipor_io power tokens

Let me explain 🧵 👇 Image
First, we can observe a quick uptick in TVL, but also a fairly balanced distribution of liquidity across pools ($DAI, $USDT, $USDC)

Whale 🐳, bull 🐂, or bear 🐻, we are in a position of incomplete information at this point. Image
We need to dig further 🐰 and think about how $pwIPOR
comes in to help users boost 🔋 their rewards.

We would start by looking at the distribution of $pwIPOR delegated to each pool 🧐 Image
Read 15 tweets
Jan 12
“The root problem with conventional currencies is all the trust that’s required to make it work” - Satoshi

But you know what is inherent to all currencies and we can't avoid trusting?

Oracles, the single point of failure that can make or break a DeFi protocol 🧵 Image
Most DeFi users understand that there is no such thing as "perfect" when it comes to protection against oracle attacks

However, there is the commonly accepted notion that @chainlink is the closest thing to a reliable and cheap solution Image
The thing is, @chainlink incentives are not decentralized

Currently, incentives for data feeders are subsidized via $LINK emissions from a multi-sig
Read 19 tweets
Jan 9
Too busy looking for gems with untested mechanism designs?

How about looking into blue chips and resilient protocols?

Here is all you need to know about @AaveAave V3 🧵
OG, IPFS and open source frontend, peak liquidity at $30B, credit delegation, flash loans... Aave has set an industry standard and a foundational layer for what a decentralized money market looks like, and there is a reason for that
However, no one can't deny that there is room for improvement in the following areas:

- Capital efficiency
- Protocol safety
- Decentralization
- User experience

Let's see how V3 tackles these challenges Image
Read 22 tweets
Jan 2
Now that many people are being quick at riding the liquid staking narrative, maybe it is a good time to introduce the concept of "restaking" and explain why it is a relevant primitive for increasing the economic security of a network🧵 Image
The potential of protocols like @eigenlayer lies on leveraging the rehypothetication of $ETH at the consensus layer.

This consists in aggregating and extending the validation use cases of staked $ETH across applications built on top of Ethereum to increase its economic security
Since the early days of #Bitcoin, many complex tradeoffs have been made to make the network robust against resource-intensive attacks

As you can guess, this is not a one-time task, and it requires an ongoing effort to maintain and scale its cryptoeconomic guarantees
Read 23 tweets
Dec 27, 2022
I know anon...I know... I understand...

Everywhere you look on-chain you see capital inefficiencies: overcollateralized lending, collateral assets sitting idle...

But what if I told you that you can combine @MorphoLabs and @ipor_io to borrow at a fixed rate 🤔 😱 🧵
As you can guess, mass adoption of DeFi is not likely to happen until a new wave of fresh capital enters the industry.

To unlock new sources of predictable returns and fixed income, there is no better combination than a borrow-lending optimizer and an interest rate swap
You have probably noticed the wide spread between borrow and lend APYs on money markets such as @compoundfinance and @AAVEProtocol

This spread is intentional and allows users to borrow/withdraw funds at any time

However, this leads to suboptimal rates for both parties
Read 14 tweets

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