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More from @defi_monk

MONK

@defi_monk

Mar 22

THREAD ALERT 🧵on @getbasedai and @pepecoins and why both deserve to be billion dollar projects.

BasedAI is truly the dark horse in the decentralized #AI narrative.

To set the stage, shortly after @getbasedai tabled at the 2024 NVIDIA GTC Conference, the #basedAI token caught massive bids, including ones from a new holder who accumulated ~ half a million dollars worth.

This skyrocketed the price to almost $9.

Could be a coincidence, but somebody saw the merits to what based labs and @pepecoins are building.

Here's why you should too👇

The tech:

A month ago the team dropped a massive paper on arXiv highlighting their novel method to securing and enabling private LLM testing on the #basedAI decentralized network.

Everything builds upon Fully Homomorphic Encryption or FHE (the holy grail of cryptography).

FHE is massive, and is one of the primary solutions at the moment to encrypt data used for LLM testing.

The problem is that FHE + LLMs pose a significant computational burden, which results in higher energy usage and costs.

#BasedAI has a solution.

Read 20 tweets

MONK

@defi_monk

Mar 6

A lot of people are asking me about $YES, so here we go.

Introducing a primer on my new biggest bag - the $YES token on @Blast_L2 built by @BaselineMarkets.

The federal reserve of Blast (not really but maybe).

In this thread I'll talk about:

1. The lore

2. Why I think $YES is going to run up massively

3. Why @BaselineMarkets is going to potentially kick off a paradigm shift in the way we think about market making, liquidity, and leverage in defi

This shit is complex, and I'd be lying if I told you I understood 100% of it, even 80% at this point. But I'll do my best, and update you as I go along.

Essentially, $YES is a numba-go-up token maximizing the potential of Uniswap's v3 capabilities to consistently push up its risk-free floor, pioneering the newest model of protocol owned liquidity, while offering native leverage.

@BaselineMarkets is the system upon which $YES is built, and hopefully will be implemented across more projects in the future.

Thread continues below:

1. The Lore:

$OHM was one of the first projects to introduce the idea of protocol owned liquidity (POL).

@ohmzeus and the crew identified inherent problems with the way AMMs and LPs operated - most critically that LPs and market makers were mercenaries, and were providing a service for profit.

This meant liquidity profiles could swiftly change depending on the incentives of the providers, and often did when tokens started going down. Pulled liq meant huge spikes in volatility, and oftentimes sharp downward spirals that killed tokens and protocols, leaving bag holders with terrible exit options.

Furthermore, token launches are plagued by problems when it comes to their supply. Predetermining the supply and distribution of a token prior to launch could mean inflated market caps, unpredictable team and KOL / VC selling, and shady business in general.

OHM's initial POL solution allowed the code to custody liquidity and supply, assuring holders that they could prevent disappearing liquidity even during times of crisis. However, constant token emissions and price appreciation meant that the protocol would sometimes be trading at a loss - buying back its own tokens at highly inflated prices. This depleted reserves when prices reversed.

To bring evolution to the POL concept, @BaselineMarkets' current devs developed Jimbo's protocol. I highly suggest scrolling through all the way back in the discord's announcements to see their journey. Before they could fully iterate, the progress on the experiment was put to a halt by an exploit:

2. Introducing $YES:

$YES is the new ERC20 token and proof of concept for Baseline that we can invest in.

Without getting too deep into the details (@0x_Beans has an amazing thread on the nitty gritty) - here's how it works.

$YES launched with the entirety of its supply, no pre-distributions, no new minting allowed, no initial 3P LPs.

The protocol's main objective is to insure that it can buy back the ENTIRE external supply of $YES at a specified price, essentially creating a price floor to the token. At launch, the baseline value (BLV) or risk-free value was just under $2.

Disclaimer: BLV is priced in ETH, not dollars, but for ease of reference I'll use USD values, just keep in mind that the USD BLV can change as ETH prices fluctuate (this is a correction on my earlier post which made it sound like the BLV is determined in USD terms).

The above enables two main components that are crucial to the project: market making and native leverage.

On market making, $YES uses three main liquidity positions to influence the token value and trading liquidity. When buying is ramping up, the protocol will thicken the $YES side of their LP reserves - selling $YES at a premium to its baseline value which incurs profit for the project. When selling pressure hits, the protocol can thicken its $ETH side of its LP, allowing for everyone to exit at minimal slippage rates. When needed, $YES can defend its BLV by ensuring they can buy back all of the floating supply.

This creates sustainable price movements and responsible distribution, resulting in less volatility within protocol determined environments. All of this is done permissionlessly and algorithmically. The code is the secret sauce. Anyone can rebalance POL across the three positions once certain thresholds are crossed through net buying or selling pressure.

If you look at the chart, price increases or decreases in relatively small candles, until the protocol either shifts its BLV up or needs to slide its discovery position down.

The best part is this - the BLV can ONLY GO UP over time (in ETH value). Profits from lp fees, selling $YES at a premium, and fees from offering leverage go towards increasing the BLV over time, and the code guarantees that the existing BLV can truly buy back the entirety of supply before it can move up.

What does this mean? Well, unless $ETH nukes, people at launch day who had a decent window of time to buy $YES below $4 are essentially resting easy. The BLV is currently at ~$4 priced in ETH, and now those initial buyers can expect purely upside versus their ETH entry. At current prices, the $YES token can only depreciate a maximum amount of less than 30% until it hits BLV, but can continue to up only for any amount. This creates an asymmetric risk / return profile that is hard to ignore as an investooor.

On leverage, because $YES owns it own supply, it can offer loans through the protocol to us degens without requiring a peer to peer txn. This is the fun part. Native $YES loans DO NOT LIQUIDATE YOU. It's essentially a term loan where you pay a fee up front and determine an expiration date. If you cannot pay back the principal at expiry - the collateral supply gets burned. Since tokens are backed by reserves at the floor price, no assets need to be seized from the borrower.

As BLV goes up, you can borrow more. You'll see $YESsers constantly talking about looping - which is essentially taking on more leverage using your loaned amount as new collateral. This allows for (9,9) with no liquidation threat (Rari PTSD solved). People in $YES don't have to sell if they need more capital to ape other Blast tokens, they can use their loan to keep looping into $YES to increase their exposure exponentially, and they can selectively loan during times when the premium over BLV is low, so that over time, a rising floor eliminates their risk. So yes, if you decided to 3x leverage under $4, you're basically set.

The game theory of all of the above - $YES will absolutely trade at a premium to BLV. In the beginning, admittedly, I expect this premium to run up to a point where it is too damn high (happened with $OHM). But this means more revenue for the protocol, which means a rising floor, which means degens will be happy to loop with the native credit facility to consistently ape more $YES.

Your downside is capped because of the BLV, but you can loop your way to degenerate level profits on the upside. This is NFA. Obviously your collateral is still at risk with looping if you can't make your payment come expiry. But the expiry on my loans are set at March 2025 - if I haven't made my money since then, who gives af anyway amiright.

The current premium to BLV is about as low as I think it'll get for awhile after the market wide altcoin dump. Which essentially means I'm calling a bottom here.

TLDR - $YES is designed to go up-only.

Read 4 tweets

MONK

@defi_monk

Jan 5

Best kept secret in Defi has been $PEAS, and it's finally breaking out. Here's a quick thread on what it is and how best to benefit:

$PEAS, $ETH, #Ethereum, #Defi, @PeapodsFinance, #Crypto

I've been accumulating this position since the end of December, and in the past two days we're seeing $PEAS rocket as people catch on to the innovations occurring here.

Now there are a mouthful of buzzwords attached to the project, but what I like best about it is this:

The protocol actually EARNS profits in a way we've never seen before. And the profits earned directly reward holders of $PEAS and LP'ers through a DEFLATIONARY token. No more getting inflated away by emissions, the $PEAS are all yours to keep - and the supply only decreases...

Read 15 tweets

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