on decentralized stablecoin flywheel effects

🧵/16 the endgame of decentralized stablecoins is to be used as a medium of exchange - trading, transfers, payment for goods and services, etc

achieving moneyness turbocharges protocols' economics, allowing for lower revenue sharing or token incentives to support required demand

With idiosyncratic merge risks now in the rearview mirror, @MakerDAO can consider next steps towards re-deploying funds into the @AaveAave D3M

I've just submitted a signal request asking if the community supports changes to MOMC guidance on D3M parameters forum.makerdao.com/t/signal-reque… Existing community approved guidance for MOMC (from November 2021) includes:

- limiting maximum debt ceiling to 30% of real DAI supplied to mitigate liquidity risks
- setting target rate no more than 0.5% below ETH-A vault stability fee to avoid cannibalizing core vault usage

tbt my first foray into threadooring

I think @eulerfinance should not add collateral support for $USDT, as it raises cost of capital for all other assets on the platform with limited benefit

forum.euler.finance/t/eip20-promot…

https://twitter.com/MonetSupply/status/1277005227900559360

if the community insists on adding support, this should include a limited max LTV (much lower than 90% proposed) and strict supply cap (< $100MM) to avoid possibility of full wipe on protocol assets

but imo the risk/return is strongly tilted to the downside

venturing deeper into the future of finance

the comptroller and community multisigs, collectively controlling at least $635MM in funds according to debank, are controlled via 2 of 4 signers

etherscan.io/address/0xB174…
etherscan.io/address/0x6327… for each multisig, one of the signers is the timelock contract corresponding to an on-chain governance mechanism (governor alpha)

etherscan.io/address/0x8412…

just added a 3DAI pool on @CurveFinance's @MoonbeamNetwork deployment

featuring @axelarcore @nomadxyz_ & @MultichainOrg $DAI tokens

hopefully will make it easier to bridge value between eth, dot, and cosmos ecosystems

moonbeam.curve.fi/factory/10 added a pool on @avalancheavax

avax.curve.fi/factory/84/

trying out something new with this month's @MakerDAO open market committee proposal

subject to voter approval, we'll be adopting a flexible forward guidance framework for certain large cap vault types (ETH-A, ETH-C, WBTC-A, WBTC-C, WSTETH-A)

forum.makerdao.com/t/parameter-ch… we're "soft" committing to not raising rates on the above vault types through August 31

this is conditional on:
- PSM balances remaining above 30% of DAI supply (currently 51%)
- rolling 7 day avg risk premium (as determined by risk CU) staying less than 2% above stability fee

Introducing the Basepool: a proposed partnership between @MakerDAO and @CurveFinance that offers unrivaled capital efficiency for stablecoin liquidity pools

Read the draft proposal here (split into two options, A & B): docs.google.com/document/d/1Yy…

TL;DRs in the tread below

1/19 The core of the proposal is a new Curve stableswap pool, consisting of $DAI, @circlepay $USDC, @PaxosGlobal $USDP, and @Gemini $GUSD

This provides a variety of fiat on<>off ramp options for users, along with linkage to the DAI credit system and vaults

bull case for terra and anchor protocol

(i'm skeptical they will be so lucky, but we'll see) lfg continues to purchase btc around current price range

lets say they get to $12B in reserves against $24B in circulating ust (50% backing)

they work out a decentralized custody mechanism, reducing regulatory and rug pull risks on btc reserves

fundamental problems with anchor protocol, a thread overview:

anchor is a lending protocol, allowing users to borrow UST against staked asset collateral (currently LUNA and ETH, more coming)

while borrow rates are set based on market utilization levels (similar to compound and aave), deposit rates are kept relatively fixed

terra vcs are really between a rock and a hard place. when ponzis collapse, receivers typically claw back investment gains from earlier participants. so their own funds’ solvency depends on them boosting and defending broken mechanisms and nasty ppl like unstablekwon

big ooof now imagine the cluelessness or just utter nihilism required to be a late joiner like those in the recent lfg round

crypto will enable limitless derivative trading

i see a lot of uncritical excitement for this, but basically no serious discussion of how this impacts markets

reuters.com/article/us-cft… two strategies for manipulation i can think of off the top of my head

(1) spot fixing but for any underlying - seeking direct profits

place derivs bet, coordinate with influential party (pro sports player, govt official, etc) to ensure win, split profits

Anchor's handling of bAsset rewards creates perverse incentives which increase risk to depositors

1/206 bAssets are tokens corresponding to liquid staking positions (currently LUNA and ETH are supported)

rewards earned on bAssets are handled at the application layer, so apps supporting bLUNA and bETH can capture these rewards as an incentive for integration

2/

Here are my @MakerDAO poll votes for the week

tl;dr: Voting to approve all measures ✅

Vote here: vote.makerdao.com/polling?networ… As ETH price rises, Maker needs to raise gas to compensate for increasing transaction costs (denominated in DAI)

This would still leave ETH-C vault type at 5,000 DAI minimum to allow for smaller scale users

Details on the dust parameter: forum.makerdao.com/t/signal-reque…

Sharing a roundup thread on recent activity within @AaveAave governance 🧵

Just voted for proposal 47 (extending liquidity mining with reduced budget) and 48 (adding @FireblocksHQ as "whitelister" for Aave ARC permissioned market) ✅

app.aave.com/#/governance Proposal 47 weights incentives for stablecoin assets towards borrowing (2/3 of incentives versus 1/2 previously)

I'm interested to see how this works out - hopefully it increases market efficiency and protocol revenue, but only time will tell

Proud $RGT and $TRIBE holder here

imo the merger proposal makes a lot of sense, but i don't think it will be easy to find mutually agreeable terms

See forum threads for reference:
tribe.fei.money/t/fei-rari-tok…
forums.rari.capital/d/177-feirari-… Synergies (why @feiprotocol and @RariCapital are worth more together):

- Fei can help bootstrap Fuse pools with FEI and PCV assets
- Rari shares Fuse admin fees from borrower usage back to Fei PCV
- Mintable stablecoins bring huge utility for cross chain liquidity

experienced my first hack last week as part of the @xtokenmarket $SNX LP pool

not a great feeling, but I appreciate the care the team is putting into the recovery process

wanted to share an alternate perspective on user compensation, loosely based on $GRAIN and $CORN the grain and cornichon tokens were made in response to yield aggregator hacks from last year

users received 1 CLAIM token per 1 USD of losses, as calculated at the time of the hack

the underlying protocol directs funds towards repayment over time

Way I see it, are two levels of incentive alignment for token based networks

1st is simple price exposure - if I govern well, network value and token price should increase

2nd is a little bit more complex and specific to each protocol - "skin in the game" Looking at $MKR or $AAVE, they have both of these features

Voters/gov participants are exposed to token price, but they also backstop their protocols with insurance

$UNI or $BAL have skin in the game in a different way - they backstop their protocol with dev funding and grants

big hurdle for @iearnfinance is maintaining high returns for depositors

the yveCRV vault helps with this by boosting LP earnings, but participation is limited due to lack of exit liquidity

I think a yyveCRV metavault could solve this

1/🧵 right now there’s basically no liquidity for $CRV<>yveCRV

this makes sense, as LPs would be giving up ~30% apy vs the 3crv they would earn from just depositing to the vault

3crv rewards are lost in AMM pools

2/

Talking about yields and APY only makes sense to me in a context where you can reasonably expect to get your initial investment back

Why should you care? And how are veCRV holders playing themselves?

🧵

1/ veCRV holders receive 50% of any swap fees from the @CurveFinance platform

Currently, 1 veCRV is "yielding" ~65% per year

1 $CRV = $0.55
Yearly earnings per 1 veCRV = $0.36
$0.36/$0.55 = 65%

Checks out, right?

2/

Just found out that @UniswapProtocol has @SnapshotLabs $UNI voting live already 🗳️🚀

snapshot.page/#/uniswap

And the community has already put forward some signal polls (gasless voting, non-binding results) 💪

1/ First and foremost, "Do $SOCKS keep feet toasty?"

Yes, yes they do ☺️🧦

@mikedemarais understands this

https://twitter.com/mikedemarais/status/1306415461253419008

2/

Postmortem on the @MakerDAO vault compensation poll 💀

57.5k $MKR voted against any compensation (65% of total vote): vote.makerdao.com/polling-propos…

Short recap, and my take on how we ended up with this result 🎬

1/ March 12-13, a sharp drawdown in traditional financial markets coincided with crypto's largest 1 day drop

Mass liquidations and network congestion overwhelmed Maker auction keepers

Adversaries took advantage by winning auctions with artificially low bids

2/