1) I'll say it once and I'll say it again:
TVL is a poor metric for derivatives exchanges
The beauty of leverage is to have $10 of buying power for $1 of margin. High TVL:Volume implies your capital is not efficient and is antithetical to the goals of a perps exchange 🧵
2) Why does anyone care about TVL at all?
In the context of e.g. PoS it could make sense to judge the economic security of a network like Ethereum or Solana is based on the amount of capital that's staked. More dollars staked in eth == harder to attack the network.
3) But when it comes to trading, what do we care about? Putting your $$ to work
This is precisely why lending markets and margin trading are powerful. I can lock up some small amount of collateral/margin and cover the rest with a loan, so purchasing power >> cash on hand.
4) Even though nobody has fully figured out how to solve the holy grail of under-collateralised loans in DeFi (due to the counterparty rug risk), it's what propels the traditional finance and CeFi markets.
Why do you think MMs love their "line of credit"?
5) Derivatives, especially perps offer a fantastic way to achieve similar trading leverage.
As a result they've become the defacto instrument for crypto traders with over 68% of *all* crypto volume coming from derivatives (mostly perps, crypto options are miniscule still).
6) So then it'll come as no surprise that the success metrics for derivs exchanges revolve around volume (capital turnover of trades) and open interest (the sum of open position values).
Anyone shilling TVL either doesn't know what they are talking about, or is misleading you.
7) Furthermore, this is why DEX designs (spot and perps) have shifted towards orderbooks and concentrated liquidity on AMMs. You want your LP capital to be traded against, not sitting idly in the wings of an xyk curve.
Study @PhoenixTrade and @Lifinity_io volume:tvl efficiency
8) So think to yourself, do I want my perp exchange to get me the most trading out of my limited capital? Do I want my LP positions generating loads of fees for every dollar I deposit?
Or do I want it to sit there like a glorified vault with all its vanity TVL.
9) P.S. I'm an engineer and retardio at finance but I feel like this is pretty intuitive and self-evident. Don't really understand why DeFi is still stuck with this TVL obsession years on. How can we fix this.
The recent episode of @Lightspeedpodhq with @aeyakovenko was a certified banger. Toly outlines a the latest and greatest coming out on the @solana roadmap and there's plenty to be excited about.
I listened to it on the plane and took some intern notes for y'all 🧵
1/ One of Solana's key design choices is allowing direct access to the leader and processing transactions as a stream, leading to the fast block times we see.
Ethereum as we know uses the mempool design which is highly censorship resistant but slow due to gas auctions.
2/ There's no silver bullet though. For this speed boost, Solana lends itself to mass transaction spam (effectively DDoS of the network).
The solution? QoS and better priority fee markets to penalise write locked accounts solana.com/news/solana-ne…
3. TLDR;
Attacker pumped the price of the illiquid $MNGO token from 3c to 91c. The unrealised PnL (marked at >$400M) of positions were in turn able to be used as collateral on @mangomarkets to borrow all assets on the platform and leave it in deficit.
Looks like the Mango hacker had ~$57M USDC withdrawn to 41zCUJsKk6cMB94DDtm99qWmyMZfp4GkAhhuz4xTwePu
This address has been around for a long time (1.5yrs+) and regularly sees 100s of millions in USDC go through it & #3 holder of USDC on Solana. Possibly @circlepay controlled?
Most of the USDC coming in seems to flow out of the wallet in due time as well, although the net balance does grow slowly over time.
You can see the recent hack withdrawal sharply took the balance from 42M to 100M USDC.
Tough day for everyone on Solana today, but here's a breakdown of what we know:
1/ At approximately 22:37 UTC yesterday a hacker began a widespread exploit, the extent of which has so far affected $4M+ of assets from 9.2k+ unique wallets.
2/ During the initial phase, funds were extracted at an aggressive pace with hundreds of thousands of dollars being lost minute to minute (all sizes here are converted to USD).
At 23:19 as we thought things were subsiding, another enormous outflow occurs in the order of $1-2M.
3/ I can't be certain if something changed in their strategy or whether they just happened to stumble across a number of large wallets (requires more digging).
As you can see at both peaks the average size of transactions is orders of magnitude higher, and predominantly in USDC.
I earned $1.4M in arbitrage profits on Solana in a single transaction. Here is how I did it.
A lot of people are messaging me about how to get started so I thought I would make a basic outline.
More detailed article to come so make sure to follow.
A thread 🧵
1. Programming fundamentals
It goes without saying that you need to have adept programming skills to make money doing MEV. I recommend starting with Scratch because of its extremely powerful visual programming model. Don't bother with outdated languages like Rust and C++ 👎
2. Learn arbitrage basics
Arbitrage is when the price differs between two different exchanges. The hidden secret of MEV is to buy low and sell high 🤯
On fast blockchains like Solana, the block times are faster which means more MEV 💰💰💰