S*: 🍭 Social Finance, 🦸♀️ Superchain, 📡 Synthetic Futures
TGI-S* with Timeless: 1️⃣ Wallets & Bridges → Superchain & Layer 3; 2️⃣ Synthetic + Futures: SynFutures; 3️⃣ Pendle: Leverages vs Yields; 4️⃣ Pull Oracles & Pyth; and, 5️⃣ Memes + Narratives < Markets.
Timeless is an Ethereum Layer-3 Chain via Base Protocol, Optimism’s OP Superchain, and Celestia’s data availability. The social infrastructure for value exchange and interoperability.
No more bridging or toggling between chains to DeFi or SocialFi. No more creating countless logins. Timeless users can carry their identity, data, and relationships across social apps. Supporting Native Account Abstraction (RIP-7560), Passkey + secp256r1 curve (EIP-7212), and ZK Validium.
Here are the two-hour recording on X / Twitter Space and on YouTube Live:
"Let them eat cake" is the traditional translation of the French phrase "Qu'ils mangent de la brioche", said to have been spoken in the 18th century by "a great princess" upon being told that the peasants had no bread. The French phrase mentions brioche, a bread enriched with butter and eggs, considered a luxury food.
https://www.wsj.com/finance/investing/retirees-boomer-candy-investing-fund-62454210
BlackRock currently offers eight ETFs focused on providing either downside protection or income through options, and the product line is in high demand, said Mark Alberici, head of product innovation and development at iShares, BlackRock’s ETF business. BlackRock has filed paperwork indicating it intends to soon launch funds with 100% downside protection.
The fund’s “covered call” strategy involves selling options tied to the large-cap stocks it invests in, which limits upside but generates premiums that are paid out to investors in the form of high dividends—roughly 8% over the past 12 months. The annual fee is 0.35%.
The most popular of the strategies, dubbed “equity premium income” by fund managers, invests in a portfolio of large-cap stocks while also selling options contracts on those shares. The funds generate higher dividend income than is typical in a stock fund—sometimes 8% to 10%—but they also cap investor gains and carry chunky fees.
Alana Levin at Variant Fund: https://www.backoftheenvelope.xyz/p/reflections-on-the-state-of-crypto
A token called $BERN leveraged Solana’s new token extensions to innovate on token economics: if someone sold their tokens, 5% of that trade was destroyed (as a reallocation mechanism to remaining holders). $BERN’s popularity became a forcing function for wallets to adopt the token extension standards – which are productive in that they can enable complex payment splits, confidential transfers.
A number of financialized social (“social-fi”) apps have emerged. Several have generated millions in fees. Friendtech and FantasyTop are the two most popular ones I’m aware of.
Speculation alone seems an insufficient propellant for long-term success. Capturing attention – even if initiated by speculation – provides an opportunity to monetize that interest in a number of other ways.
Wallets & Bridges → Superchain & Layer 3
https://members.delphidigital.io/reports/superchain-and-the-monolithic-experience
[Omnichain Fungible Token] OFTs from LayerZero, xERC20 from Connext (although open source and agnostic), NTT from Wormhole, ITS from Axelar, and Warp Routes from Hyperlane are all omni-chain token standards that fluidly move across the supported chains through a burn and mint mechanism. This solves the path dependency problem present in the Cosmos ecosystem ( i.e., A → B → C =/ A → D → C ).
Wallet Infrastructure: A user expects simple transaction confirmation and probably delegation of control to a third party for repeated actions. This can be things like a simple EOA wallet that requires them to sign transactions but asks for chain switches, smart accounts that allow them to delegate part of the control to a third party, or embedded wallets that abstract away everything.
Native Account Abstraction enables developers to create a gas-abstracted dApp experience for their users. It is also possible to fetch any user assets across chains using account abstraction to offer a seamless cross-rollup onboarding experience. Inter-chain Accounts: This is a feature available in the Cosmos/IBC land. Inter-chain accounts allow users to control a dApp on a different rollup by just interacting with the rollup that the user is connected to. This will be a game changer especially if a rollup is non-EVM, thus would have a different wallet address than the Base or OP Mainnet Address.
No Changes to the Base Layer: looks similar to the Ethereum/EVM interoperability space right now. Although it is a subpar experience for the users, with intent protocols and smart wallets on the horizon, we will be able to enjoy the monolithic experience with an abstraction layer on top of the dApps. The user experience, costs, and security will all improve over time with competition and innovation. dApp Developers can use [Multi-Message Aggregation] MMA-like solutions for trust-minimized bridging of assets across chains.
Polygon’s AggLayer offers a monolithic experience. With account abstraction, it is possible to abstract everything away for the users in a secure manner while providing instant finality as the system evolves.
https://messari.io/report/degen-chain-packing-layers
L3s have a lower bar for trust and may be more suited for validiums. Instead of living on an L3, users may just visit them, as bridging costs are minimal. In a recent interview, the founder of Degen Chain compared bridging to Degen Chain to visiting Las Vegas, where the main value is entertainment rather than profits.
Synthetic + Futures: SynFutures
https://messari.io/report/synfutures-the-permissionless-trading-solution-for-crypto-assets
There are two unique price oracles used by SynFutures: Chainlink and LWAP (liquidity-weighted average price) from spot DEXs.
Every underlying listed on SynFutures has three markets. There are two futures contracts, one for the current quarter and one for the next quarter. Additionally, there is a perpetual futures contract, which is a futures contract without an expiration date.
With SynFutures, each underlying shares its margin account across all three markets mentioned previously. The margin account includes the user’s collateral, LP position, and even PnL of open positions of that market.
https://messari.io/project/synfutures/quarterly-reports/q1-2024
Liquidity providers (LPs) define the breadth of their price range, and native limit orders are set at discrete price points and become irreversible once executed... Each "Pearl" on the AMM price curve represents a market depth at that price. When trades occur, limit orders are filled first, minimizing slippage and allowing the Oyster AMM to rival the efficiency of centralized exchanges. The mechanism reduces margin requirements, enabling up to 100x leverage in trading.
.. order management, matching, and executions occur fully onchain - unlike alternative models that depend more heavily on centralized controls.. Popular crypto traders such as CMS Holdings, CL, and Awawat Trades were tagged as participants in [its Grand Prix trading competition].
https://messari.io/report/state-of-synfutures-q1-2024
SynFutures V3 emphasized capital efficiency, which requires only one set of margins to provide liquidity for both sides… uses each concentrated liquidity range existing as an independent AMM. Each liquidity pool only supports a specific price range. If the AMM price were to deviate from that range, anyone could remove that liquidity and convert it into a trading position. In turn, the trading position would go to the account of the original owner of the concentrated liquidity.
https://members.delphidigital.io/reports/get-ready-to-blast-off#notable-projects-to-watch-9771
Perp DEX (6 winners): 100x Finance, Blast Futures Exchange (BFX), Blitzx, Bloom, InfinityPools.finance, SynFutures. Over $1.6 billion is actively engaged in DeFi protocols, covering a diverse range, including money markets, spot and perpetual DEXes.
https://members.delphidigital.io/reports/dao-governance-digest-15
GHST Liquidity on SynFutures: Proposed on behalf of SynFutures, this proposal would list GHST on their platform, and asks the DAO to add $200k of GHST to the pool. This would create an on-chain futures market for GHST tokens.
https://medium.com/@med456789d/uniswap-insights-5-6-lp-hedging-2-the-greeks-467b60f1af32
One interesting quirk of v3 I noticed is if one concentrates liquidity exactly 75% or more below the current price for p_a and sets p_b to the current price, then the value of the X asset peaks at 25% which might have some strategic value for someone trying to accumulate.
Such a strategy would be inherently aiming for a price decrease to accumulate for the future while earning fees. Note that without the option it becomes a riskier approach in which case it can make sense only if the executor has incredibly strong conviction about a rebound.
Diverse Strategies are at the heart of Perp V3. They determine how liquidity is provided and at what price. Think of them as different ways of offering programmable liquidity. A strategy comprises two main components: Pricing and Hooks.
Pricing: This core element provides liquidity by quoting prices e.g. using an oracle to price, or using an onchain pricing curve (AMM). It doesn’t handle settlement or accounting, leaving that to the clearinghouse.
Hooks: While optional, strategies can have other logic baked into it. An example could be similar to Uni V4’s pre and post hooks (e.g. once an order has been filled, go and hedge it on venue a).
https://members.delphidigital.io/reports/perp-2-0-redesigning-a-success
https://messari.io/report/ribbon-finance-s-tr-addle-up-for-a-ride-into-structured-products
Ribbon plans to take that asset that is already generating yield and sell options on top of that to create what may become the highest yields in all of DeFi.
Given the high gas fees on the Ethereum network when deploying this strategy (Q1 2021), the team made the decision to stop offering the volatility product and have focused their efforts on yield enhancement products that they term ‘Theta vaults’.
.. there is a balance between choosing the right strike that is sufficiently close to the market price to ensure maximum premium collection with the risk of the option expiring in-the-money (ITM). The Ribbon team currently governs strike selection and expiry.
If options expire ITM then the vault is obligated to buy the underlying asset at the predetermined strike price i.e. ‘buy the dip’. The first Puts Vault product will sell puts against $ETH allowing users to either capture the premium and accrue yield on their $USDC or buy $ETH on dips all automatically through Ribbon.
Pendle: Leverages vs Yields
https://members.delphidigital.io/reports/the-year-ahead-for-defi-2024#pendle-cebf
Pendle is the only grower, and although it has come a long way with its v2 and has separated itself from the once saturated yield stripping sector, its usage is heavily incentivized by a veToken program and Arbitrum STIP incentives beginning in October.
Pendle’s resurgence was primarily the result of an abundance of liquidity from composable [Liquid Staking Derivatives] LSD tokens and the narrative around LSDs leading to organic volume for rate trading. LSDs account for over 60% of Pendle TVL today.Yield stripping protocols like Pendle will continue to be an important part of shaping crypto native activity and behavior towards interest in [Interest Rate Derivative] IRDs (versus IPOR).
https://messari.io/report/eigenlayer-the-point-to-the-points
Liquid restaking protocols like ether.fi and Kelp DAO deposit ETH into EigenLayer on behalf of their users and issue liquid restaking tokens (LRTs) in return. As the LRT protocols deposit ETH into EigenLayer, they earn EigenLayer restaking points, not the users. However, there is an understanding that protocols will distribute any airdrops to LRT holders.
Recently, through a partnership with Pendle, LRT protocols have integrated Pendle assets. Now, when a user deposits an LRT into a Pendle contract, the LRT protocol tracks this to distribute any future points to the holder of the YT instead. In effect, users can now strip the potential airdrop component of EigenLayer points from the LRT into the YT. And they buy or sell their potential EigenLayer airdrops by trading the YT.
https://messari.io/report/us-treasuries-fuel-real-world-asset-growth
Pendle uses a vote escrow (ve) governance system that allows users to lock PENDLE for vePENDLE and share in the protocol’s revenue share. vePENDLE holders receive 80% of swap fees, 3% of fees generated by all yield accrued by Pendle’s Yield Tokens, and a portion of yields after the maturity of unredeemed Principal Tokens and Yield Tokens.
Pendle’s recent price growth was catalyzed by the start of the “Pendle wars” in early June. After their launches, Penpie and Equilibria were quick to become the largest vePENDLE holders and subsequently contributed to a decrease in liquid PENDLE supply.
https://members.delphidigital.io/reports/mantle-network
Furthermore, with Pendle already operational on Mantle, the approval of this proposal could lead to the next strategic move: integrating mETH into Pendle pools. This will unlock additional utility for mETH holders by enabling them to provide liquidity, hedge future yields. or speculate on mETH yields and rewards.
https://messari.io/report/dude-where-s-my-stablecoin-yield
Pendle pools offer among the best yields for stablecoins, combining high returns with guaranteed fixed yields. The highest yields are provided on USDe and sUSDE, offering just under 30% fixed APY.
This yield is primarily related to the speculation around the upcoming Ethena airdrop, expected by early September, marking the end of the current Ethena SATs campaign. Ethena initially allocated 15-20% of its token supply for incentive programs, with 5-10% likely remaining available for a potential third campaign.
Blast Futures and Synthetix: Providing liquidity to derivatives protocols carries more risk compared to alternative options, as these vaults perform market-making strategies that can result in drawdowns.
https://members.delphidigital.io/reports/the-path-forward-for-defi-fixed-income-and-yield-tokens
Pendle, meanwhile, uses a dynamic curve AMM for their Yield Tokens [YT] and outsources the Ownership Tokens [OT] trading to SushiSwap (Ethereum) and Trader Joe (Avalanche). OT represents the principal of the deposit and trades against the underlying asset. The YT tokens also trade against the underlying asset, but users holding YT can claim the accrued yield at any time.
Claiming the yield creates a tricky situation for Pendle. The user who holds YT accrues and retains the yield, even if they sell the token later. This means that the value of YT declines as the holder claims it. If they used a traditional AMM for YT, LPs would face near infinite impermanent loss as the value of YT fell to zero at maturity. Hence, they created a custom AMM that uses “dynamic curve shifting” to reduce the IL caused by the time decay.
https://messari.io/report/narrative-games-part-1
Ethena or MakerDAO likely to be the source of the next meta... [but] Pendle's future yield speculation and Morpho and Gearbox's leveraged farming have reduced the room for new innovations.
An opportunity must offer yields significantly above market rates (15-20%) and support large capital pools (upwards of $1 billion) [such as] liquidity mining incentives during the 2020 DeFi summer, veTokens by Curve, and Anchor’s 20% yield on stablecoins.
https://members.delphidigital.io/reports/mantle-network
USDe has been the primary growth driver for stablecoin equivalents on Mantle, largely due to the launch of Pendle and Mantle’s incentives involving EigenLayer points.
Although Ethena and EigenLayer are not directly linked, Mantle Treasury has incentivized the USDe pool with 0.0012 EigenLayer points per USDe per day. This generous incentive aims to boost participation and liquidity in the pool.
A key technical difference between Pendle v1 and Pendle v2 is that PTs and YTs are now traded in a single pool. This consolidates liquidity and streamlines incentive accrual/distribution. For each asset, the single AMM pool consists of PT and the base asset. The price of YT is derived from the relationship between PT and the base asset. When a user buys or sells YT, the trade is routed through the PT-base asset AMM pool via flash swaps.
This approach removes the need for separate liquidity pools and significantly reduces IL due to the high degree of correlation between pool assets. Concentrated liquidity allows for increased capital efficiency and more control for LPs.
Like Voltz, Pendle is benefitting from the [Liquid Staking Derivatives] LSD narrative and volatility of [GMX Liquidity Provider] GLP as demand drivers for the platform. Previously, yield derivatives protocols mostly involved money market stablecoin pools, which did little to generate volume. Pendle v2 opens the door for permissionless pool creation and cross-chain functionality through an integration with LayerZero.
Illuminate is a new take on fixed rate lending that aims to provide a more scalable infrastructure for fixed rates in DeFi. Illuminate accomplishes this by wrapping external principal tokens into meta-principal tokens (iPTs). External principal tokens are grouped by similar maturities, and the iPT is only redeemable once all external principal tokens have reached maturity.Illuminate currently supports 10 protocols, including Notional, Yield, Swivel, Element, and Pendle. Illuminate’s flexible architecture utilizes EIP-5095, allowing it to easily create principal tokens for Voltz and IPOR as well.
https://messari.io/crypto-theses-for-2024
Liquid Staking Tokens (LSTs) are having a transformative effect across the DeFi ecosystem, too. LST deposits have accounted for effectively all of the growth in Aave deposits this year, and now represent the majority of all lending activity in the protocol. Maker is following a similar path, with liquid staking deposits surpassing ETH as collateral (stablecoins and RWAs still represent the plurality of collateral assets). And the new LST-backed stablecoin market is now exploding, amassing ~400k ETH in staked assets so far this year.
The nearly $1 billion TVL in these [LST-finance] protocols is yield-bearing assets. Yield is the lifeblood of finance, and these protocols unlock a new, sustainable yield source for DeFi. PENDLE, the native token of the yield trading protocol, was one of the best performing assets in 2023, up over 2,000%. Projects like Ethena and Prisma are still early in their stablecoin development and have the potential to bring new exciting solutions to LSTFi.
Pendle saw an increase in TVL as they integrated more popular yield protocols such as Lido, Aura, GMX, and APE staking. These integrations allowed users to trade their yields, enabling them to lock in their yield APRs in a volatile yield market.
Additionally, depositors can provide liquidity on Pendle’s principal token [PT] pools, which are paired with yield-earning tokens to earn yield in PENDLE as well as reward tokens such as AURA and ETH. This feature allows users to earn boosted yields while being liquidity providers and vesting a portion of principal tokens that can be redeemed 1:1 once they mature.
https://messari.io/report/ethereum-s-ecosystem-is-staking-up
Pendle is one of the leading interest rate derivative protocols. It splits yield-bearing tokens into a Principal Token [PT] and a Yield Token [YT] with a fixed maturity. The Principal Token functions as a zero-coupon bond that is convertible to the underlying asset on the maturity date. The Yield Token receives all future yield generated and can be sold to lock in the current staking yield. Buying a Yield Token exposes users to the staking yield without holding the underlying asset.
https://messari.io/report/beyond-defi-2-0-what-is-driving-defi-s-current-innovation
Another group of model extenders take DeFi derivatives and deconstruct them into separate pieces. Examples of these types of projects include Pendle and Tranche Finance. This optionality provides users with more customization and hedging strategies. Given their high level of innovation, the number of model extender groups is scarce compared to model automaters and model enhancers.
Escrowed collateral. The simplest way to construct an over-collateralised position is for the borrower to place their collateral in escrow for the duration of the loan. Being in escrow means that the borrower’s collateral is simply held aside by a smart contract and remains untouched for the duration of a loan.
Lending collateral is often an attractive option for borrowers, because it allows them to earn yield on their collateral, lowering their net borrowing costs. In turn, this can stimulate further demand for borrowing assets, ultimately benefiting the lenders of other types of assets. Earning yield on collateral also enables novel types of trades, such as so-called ‘basis’ or ‘cash and carry’ trades.
https://www.euler.finance/blog/euler-v2-the-new-modular-age-of-defi
Euler v2 addresses the limitations of monolithic and isolated lending protocols, aiming to become the primary liquidity layer for DeFi. The modular architecture resolves liquidity fragmentation, allowing permissionless creation of vaults that seamlessly connect across the ecosystem.
Advanced Trading and Risk Management: For developers, the EVC provides multicall batching, flash liquidity, gasless transactions, and an “operator concept” for advanced trading and risk management strategies.
LSD finance, or LSDfi, is a term that is used for LSD-related DeFi protocols. This includes mature DeFi protocols such as Aave, Balancer, and Curve, but also new and upcoming protocols that help increase the utility of LSDs.
LSDfi is classed into five different utilities: 1. Interest Rate Swaps. Interest-rate swap protocols like FlashStake and Pendle allow LSD holders to trade their yields. In addition to this, they can also earn incentive rewards by providing liquidity.
https://members.delphidigital.io/reports/contango-a-forward-looking-approach-to-leverage
Gearbox and Contango are similar in their struggle to generate organic usage of their margin trading product. This is not an immediate concern, as a lack of organic usage for the core product has not stopped Pendle from ascending to DeFi blue chip status.
The funding rate is made up of the lending interest of the collateral and the borrow interest paid for the loan. Traditional funding rates are determined by market skew and divergence of futures price from the spot price.
Contango teamed up with Simtopia and University researchers for an academic paper comparing traditional perps with loans built on top of money markets. The study found that the funding rates of loan positions were substantially less volatile than traditional perps. [See Contango’s blog, Simtopia’s blog, and Simtopia’s dashboard].
Gearbox attracts its own liquidity and has its own liquidity pools. In this respect, it is more of a leverage broker. Contango is built on top of money markets and is best thought of as looping infrastructure.
Pull Oracles & Pyth
https://members.delphidigital.io/reports/the-oracle-of-pyth
The first major issue was around the BTC/USD price for a 2-minute period on Sept. 20th, 2021. Due to 2 out of 11 publishers making a decimal point error and the aggregation logic overweighting their contributions, the aggregated price ended up being significantly off BTC’s true price of ~$42k, reporting prices as low as $5,402 with confidence intervals of +/- $21,623. This error led to useless (and dangerous) price info. For protocols that didn’t incorporate the confidence interval, and simply relied on the median price of $5.4k, this resulted in detrimental effects such as erroneous liquidations.
There were also a few other early issues, like a software bug that reported a negative [Time-Weighted Average Price] TWAP, Solana network congestion resulting in stale and less-diverse price updates (which is hard to blame Pyth for), and some other extremely-wide confidence intervals like the BTC issue on illiquid/poorly covered markets.
Since the Mango attack, we have seen other protocols like Compound delist some of these illiquid assets as a preventative measure, and this is also a situation where widening confidence intervals or using a TWAP, [Simple Moving Average] SMA, or [Exponential Moving Average] EMA could help mitigate negative outcomes. Pyth has also started doing more work around the concept of Liquidity Oracles, incorporating an asset’s liquidity into the underwriting process and thus adding the market impact of selling the collateral asset into the max-borrow formula. The goal here is to prevent users from creating positions that are too large to liquidate.
While borrow/lend protocols usually have the most value secured (Aave and Compound for Chainlink, Solend for Pyth), they do not request the most price updates. This instead comes from derivatives protocols who need to take advantage of the low-latency prices, vs. a borrow/lend protocol that does not need to update every slot. Pyth has enabled some unique products with their oracles:
Mango Markets: A derivatives exchange that uses Pyth for its borrow/lend book and to price their perp market’s funding rate. Mango was one of the first protocols to integrate Pyth’s confidence intervals for their borrow/lend book. Note that the recent unfortunate market manipulation on Mango was unrelated to Pyth.
Zeta: Touched on earlier, but a derivatives exchange that uses Pyth’s confidence intervals to prevent manipulation around settlement and to price their futures and options. Pyth is also utilized for their new product FLEX, a permissionless and customizable options protocol.
01: Another (surprise) derivatives exchange offering both standard perps and power perpetuals, a product similar to Opyn’s Squeeth. These are like regular perpetuals but raised to a power, offering option-like exposure. They use Pyth for their funding rates.
https://members.delphidigital.io/reports/the-oracle-report-of-delphi
Band Protocol is the only live oracle solution covered in this report that is completely reliant on free data sources.
https://messari.io/report/understanding-pyth-network-a-comprehensive-overview
Only three protocols secure more value than Pyth Network: Chainlink, Chronicle, and WINkLink — these top four protocols account for 90–95% of the TVS among oracles.
The robustness of Pyth’s data is largely due to its contributing publisher network, which comprises nearly 100 data providers from global exchanges, trading firms, market makers, institutions, and DeFi. A few notable providers include Jane Street, Chicago Trading Company (CTC), Binance, Raydium, Osmosis, Galaxy, and 0x. Pyth is focused on making financial market data available to developers on an expanding list of blockchain networks (50+ blockchains as of writing).
Chainlink also offers a pull model in its Data Streams product… only on Arbitrum and maintain eight price feeds.
https://messari.io/report/state-of-pyth-network-q1-2024
The top five protocols that Pyth secures are all Solana-based applications: Kamino, marginfi, Jupiter, Drift, and Solend. Collectively, these five protocols accounted for 42% of Pyth’s [Total Value Secured] TVS by the end of Q1. The other protocols in the top 10 operate on other chains.
These include ZeroLend, Orbit Protocol, Avalon Finance, Aries Markets, and Synthetix. Collectively, these protocols accounted for 21% of Pyth’s TVS. As such, 63% of Pyth’s TVS is concentrated in the top 10 applications across 13 blockchains.
https://members.delphidigital.io/reports/how-oracle-less-primitives-are-rearchitecting-defi
Instead of simply calling borrower loan requests “orders” Astaria has strategically framed these as “intents”, subsequently harnessing both the oracle-less and intents narratives. Founded by ex-Sushi CTO, Joseph Delon, Astaria launched in May of last year [2023].
More efficient LST/LRT lending and borrowing markets – Although LSTs and LRTs will likely see brief depeg events going forward given slashing risks, this does not mean that these assets are no longer redeemable 1 for 1. While oracles have no notion of this concept, the free market does and therefore Ajna will be able to provide much more advantageous collateralization ratios without unintended liquidations on LSTs and LRTs.
Trading volatility – Under Ajna’s design, interest rates are inherently sensitive to market volatility. Users therefore will be able to structure positions around trading volatility by pairing their liquidity deposits with other derivative products.
https://www.shoal.gg/p/amm-lp-enabled-perps-options-and
Innovative volatility trading platforms like Panoptic, Infinity Pools, Smilee, and others push the needle by providing oracle-free, liquidation-free, and even, in some cases, offer significant leverage. Powered by concentrated liquidity, AMM LP trading products remove some prominent weaknesses like managing oracles and liquidations.
Oracle risk – Ethena uses an internal PMS system to determine the price that it assigns to collateral or received assets during the minting/redeeming of USDe. The internal system evaluates pricing across Ethena’s trading venues in addition to DeFi exchanges, OTC markets as well as oracle providers such as Chainlink and Pyth.
The biggest risk is ultimately around liquidations and the oracle mechanism. Given that these loans have relatively higher liquidation loan to value ratios (LLTVs), a brief de-peg or oracle malfunction could trigger unwarranted liquidations despite the fundamental value of sUSDe or USDe not actually changing. Subsequently, this could catalyze a cascading effect where liquidations beget more liquidations.To mitigate these risks, Spark has made the difficult decision to “hard-code” the oracle. This means that the price of DAI and the price of USDe or sUSDe are fixed at par. In other words, as far as the oracle is concerned, the two assets cannot de-peg from one another.
Supra’s oracles reach finality faster than other oracles and aim to reach 600-900ms data freshness rates with upcoming updates to [Distributed Oracle Agreement] DORA. DORA can also skip posting and validating on the Supra Chain and directly send the S-value from a Clan to the destination, unlike Pyth, which has first to post data to its blockchain and then Wormhole. Lower hops would reduce latency and be apt for data requiring a high degree of data freshness. Supra runs both pull and push-based oracles.
https://delphilabs.medium.com/price-oracles-for-derivative-assets-182804d9dabb
https://members.delphidigital.io/reports/price-oracles-for-derivative-assets
It allows attackers to use bridgedETH as collateral to steal funds from the protocol. Any attacker would be able to buy bridgedETH from the market at 0, deposit it in the protocol as collateral (where it would be valued at 1 ETH and borrow (steal) other assets in an effectively uncollateralized fashion. This type of attack has already been used on different live protocols (for instance, to Hundred Finance on Moonriver and to Aave on Harmony).
This soft peg means that over the long run the market price should tend to follow the redemption rate, but in the short term there isn’t really a floor to the price of stakedATOM. We’ve already seen this play out in reality with the infamous stETH “depeg” and other LSDs such as stLUNA. Basically, when enough people want to exit the LSD without waiting for the unbonding period the price will tend to “depeg” to the downside.
https://members.delphidigital.io/reports/arithmetic-or-geometric-mean-twap-which-one-to-use (by [Head of Risk] Jonathan Erlich, Euler Protocol’s Michael Bentley, B Protocol’s Yaron Velner, Mars Protocol’s Tatiana Pashinskaya)
[Geometric Mean Time-Weighted Average Price] GM TWAPs are significantly more robust to upwards price manipulation attacks and, while they are less robust to downwards price attacks than [Arithmetic Mean] AM TWAPs, they are still considerably costly to manipulate.
In terms of , we showed how both types of TWAP perform similarly under different scenarios.
https://members.delphidigital.io/reports/attack-cost-and-profit-from-manipulating-constant-product-market-maker-twap-oracles-in-defi-protocols (with Ayana T. Aspembitova [now at Euler Labs])
https://pubmed.ncbi.nlm.nih.gov/36673200/
https://medium.com/decipher-media/twap-oracle-attack-fedec24a59f0
… understanding the mechanics and cost behind it, it is possible for protocols to adjust key parameters (TWAP window size, position size, liquidity requirements) in order to safely use the oracle.
Memes + Narratives < Markets
Since LeCun’s criticism on pure reinforcement learning methods mainly focuses on sparse reward signals, Abbeel illustrated his point with Hindsight Experience Replay, a novel, sample-efficient learning technique that tries to get a reward signal from any experience by simply assuming the goal equals whatever happened.
https://www.vaneck.com/us/en/blogs/digital-assets/matthew-sigel-eth-2030-price-target/
Ethereum is a successful digital economy that attracts ~20M monthly active users while settling $4T in settlement value and facilitating $5.5T in stablecoin transfers over the last twelve months. Ethereum secures over $91.2B in stablecoins, $6.7B in tokenized off-chain assets, and $308B in digital assets.
The centerpiece asset of this financial system is the ETH token, and in our updated base case, we believe it to be worth $22k by 2030, representing a total return of 487% from today’s ETH price, a compound annual growth rate (CAGR) of 37.8%.
https://messari.io/report/systematic-memecoin-investing
Crypto bull markets are often led by BTC or smart contract platforms for... liquidity backdrop, risk-reward profiles, buyer persona, tech breakthroughs... Speculation tends to flow down the risk curve until memecoins reach cultural relevance resulting in volcanic returns leaving investors in the “legit” assets in disbelief.
.. attention and capital being fractured among many memecoins and an overall compression on returns taking into account the risk-reward profile of the aggregate set of memecoins... there, of course, will still be significant returns in select memecoins and for people with a pulse on cultural attention.
https://messari.io/report/may-2024-fundraising-report
Kiosk raised $11 million in a Series A led by Electric Capital. Kiosk is developing a Farcaster client integrating social media with onchain commerce. It enables users to mint NFTs, discover and buy assets, join token-powered communities, and receive notifications about important events, all within a single application.
Neynar raised $11 million in a Series A led by Haun Ventures and Union Square Ventures. Neynar is a developer platform offering APIs and SDKs for interacting with Farcaster. The platform enables writing data, creating bots, managing Farcaster frames, and accessing user and feed information on Farcaster. Neynar also provides tools for setting up webhooks, managing storage, and querying data via SQL.
https://distributedresearch.substack.com/p/diving-into-dark-pools
https://members.delphidigital.io/reports/diving-into-dark-pools
Railgun’s Railway DEX uses the 0xAPI built by 0x. This means that orders out of the Railway DEX are routed to find the optimal price for execution across the 0xAPI DEX aggregator. Once a trade route is found, the wallet generates proof to use the funds in the trader’s balance to swap and shield the incoming tokens from 0xAPI to the trader’s balance.
Railgun uses “Proof of Innocence”, talked about in the Privacy Pools 2.0 paper, developed by Chainway. Recursive SNARKs are used to prove that the chain of proofs right from the initial deposit to the eventual withdrawal was calculated accurately as proof that a user’s balance was NOT part of a certain transaction set.
As of 2022, over 60 dark pools were registered with the SEC. Some are exchange-operated, like the NYSE or NASDAQ; some are broker-dealer-operated, like MS Pool by Morgan Stanley and SigmaX by Goldman Sachs; and some are independently operated, like Liquidnet or MatchNow.
The issue with operator-run dark pools is that the operators potentially have more incentive to misbehave than to work in a compliant fashion. The equation is simple: Profit from Corruption > Cost of Corruption. Operators could get away with more profits than they would ever have to pay in penalties. In 2018, the SEC fined Citi Group $12Mn for misleading their investors about operating their dark pool while they leaked confidential order information to High-Frequency Traders who executed orders worth more than $9Bn against Citi’s customers, profiting from them.