1/ Money markets unlock large sums of liquidity in modern financial economies. Money markets allow savers to lend money to those in need of short-term loans and allocates capital to its most productive use. Three elements are needed to create a money market: 2/ When considering DeFi use cases produced thus far, two stand out as finding product market fit (PMF) and staying power. These are also the first two elements that make up a money market.

1/ Money Trilemma

Most of us were taught that money is a "unit of account, store of value, and means of exchange".

There's reason to think that's wrong. Time for a thread🧵: 2/ Money does NOT have to simultaneously satisfy all three of these properties. In fact, good money designs are robust because they are great at just one of these properties.

1/ Building from First Principles

The Buttonwood Foundation was formed with the goal of providing frameworks and tools for building DeFi from first principles🧵: 2/

Thinking from first principles means actively questioning assumptions, boiling things down to fundamental truths, and reasoning from there.

This contrasts with reasoning by analogy, which means imitating what other people already do, or what already exists.

https://twitter.com/SahilBloom/status/1329458586653757447

1/ Discount Rate vs. Interest Rate, and A- vs. B-Tranche Risk

The Discount Rate and the Yield (Interest Rate) are two *different* calculations for the bonds on Buttonwood Zero🧵: 2/

All of ButtonZero's bonds are zero-coupon.

Each bond listed on Zero has an expected face value of $1.00 -- this means if a tranche is at least 100% collateralized at maturity, that token is redeemable for $1.00 of collateral.

https://twitter.com/1414711190257868800/status/1547253837630787585

1/ Discount Rate vs. Interest Rate, and A- vs. B-Tranche Risk

The Discount Rate and the Yield (Interest Rate) are two *different* calculations for the bonds on Buttonwood Zero🧵: 2/

All of ButtonZero's bonds are zero-coupon.

Each bond listed on Zero has an expected face value of $1.00 -- this means if a tranche is at least 100% collateralized at maturity, that token is redeemable for $1.00 of collateral.

https://twitter.com/ButtonDeFi/status/1547253837630787585?s=20&t=eC7pSUuWhZQ8O3isAcnQAA

1/ Placing a Bid

ButtonZero functions much like an order book. How do you place orders?

This thread provides some examples🧵: 2/

As a reminder, Bond Buyers are Lenders. Bond Sellers are Borrowers. A government sells bonds to borrow money.

Instead of taking the market price, users can place an order.

An order to buy is called a “Bid”. An order to sell is called an “Ask” (the price you’re asking for)

1/ ButtonZero Part 2: Dangers of Margin Lending

To understand #crypto meltdowns, you need to understand the biggest volatility multiplier:

Margin Leverage.

Let’s take a look🔽: 2/

There are many risks DeFi users take on such as smart contract bugs, “rug pulls”, and loss of private keys.

The industry tries to reduce these risks through audits, vesting, and OpSec.

1/ Button Zero is not a liquidity pool protocol, even though it routes through Uniswap v3.

How can that be the case? Let’s review the three ways in which Uni v3 (and AMMs in general) can be used:

1. Liquidity
2. Options
3. Order book 2/

Uni v3 could be configured as a regular Uni v2 x*y=k pool, allowing liquidity for any two arbitrary assets.

This usage benefits traders and is subsidized by LPs, who suffer impermanent loss.

Uni v3 positions can also be configured to resemble options...

1/ ButtonZero Part 1: Zero-token, single-token, double-token debt

Implosions of #Celsius & #3AC make it clear that web3 needs alternatives to margin leverage.

ButtonZero’s approach involves what we call double-token debt. Let us explain using the history of debt innovation🧵: 2/

It helps to think of debt as a transaction across time.

Most trades are instantaneous —Alice gives Apples to Bob, Bob gives Alice some Bananas.

With debt the “trade” is across time—Alice gives $100 to Bob today, conditional on Bob giving Alice $120 a year from now.