It has been almost a year since the first time I wrote these words. Any industry has its good and its bad. You leave an industry when the bad outweighs the good. I’m still here, so don’t get me wrong there is good. The purpose of me writing this follow-up is to rant, which I find therapeutic. And also, to let other developers know, its okay, it can be shit. And maybe even, it will be shit. This is only the bad, not the good. Take it in context.
Development takes time, much longer than even you, as a developer, think it will. Nine out of ten ideas will fail. You can spend months or years building on something that conceptually you thought would take a few weeks. This is part of the process. This in itself can be demotivating. But now, add hundreds (sometimes thousands) of people shouting on telegram, discord, and twitter “when will it be released?”, “why hasn’t it been released?”, “give us an update!”, and often, significantly more hostile messages. So take something that is already difficult, and make it exponentially worse. As defi developers, our work is incredibly public, the good, more eyes, more peer review, faster development cycles, the bad, your mistakes are used as “ammunition” against you, and will be used for weeks and months after they have been rectified, your delays are seen as incompetence, and your failures are amplified ten fold. So there is already immense pressure to constantly be releasing new updates and this creates a very stressful development environment. And what happens after you release it? “when is the next upgrade?”, “what is being built next?”, “give us an update!”. Because, you see, no one was actually waiting for your development, they were waiting for a “price shifting event”. They don’t actually want to use your product, they only want to use the “narrative” of your product to make money. …
Single sided exposure, and impermanent loss mitigation. I started down this path with yswap originally. Back then, the idea was simple, introduce a transfer token that represents the USD value of the assets being deposited.
If you deposit 1 ETH it mints 1000 USD and supplies them to the AMM. While in practice this seemed simple, it led to a myriad of potential problems and economic exploits.
7 months later, and roughly ~14 revisions, from yswap, to stable credit, and now Single sided exposure and Impermanent Loss mitigation, or sil.
The core concept is still the same as the original iteration of yswap; deposit an asset, and a representative value of said asset is introduced to the system. The core difference here, is that the asset is not pegged to USD, but instead has an lower bound of USD. …
First, lets look at the current liquidation landscape. There are two core things;
- Collateral
- Debt
Most simplistically put, when debt > collateral a liquidation occurs. So to keep things simple, lets use 100% values.
If you provide 1 ETH as collateral (and for the sake of this article, lets assume 1 ETH = 1000 USD), you can borrow 1000 USD.
If the value of 1 ETH falls to 900 USD, you are a liquidation candidate since debt > collateral
The mechanism of liquidation can vary significantly from system to system.
In a margin based system (or any system where the system owns the borrowed (debt) asset). it can simply close your position. Return the 1000 USD and take your 1 ETH. In systems where the debt is outside of the system, liquidators needs to be incentivized to repay on your behalf. In these cases, a liquidator would repay your 1000 USD debt and claim your 1 ETH. …
There are a few mechanisms that can be used for peg management. In this article I will explore some existing solutions;
1:1 Deposit & Redemption (USDT, USDC, TUSD, etc)
Arguably the simplest solution. Deposit 1 USD mint 1 USDT. Burn 1 USDT withdraw 1 USD. If 1 USDT > 1 USD, minters deposit USD and sell USDT earning profit. If 1 USDT < 1 USD, arbitrageurs buy 1 USDT and burn for 1 USD.
Collateral (DAI, sUSD, etc)
Create a debt position off of collateral and mint. Deposit 1 ETH mint 700 DAI. As long as sum of collateral ≥ outstanding debt (minted amount), then the system is table. A qualification here is that the debt itself does not need to be stable, the invariant collateral ≥ debt simple needs to hold true. …
We have released our third iteration of Stable Credit. As we continue to build upon the protocol we have some interesting observations to document.
Aggregated Yield
Instead of continuous interest rates, the protocol collects fees on every deposit, borrow, or repay event. All these fees are taken in the Stable Credit currency. The net result is aggregated yield across all supplied pairs.
Trading fees
Since all collateral is automatically supplied to make the stable credit market, this inherently means that all collateral earns trading fees. Trading fees are collected over and above minting yield.
Interest free protocol loans
The economic flaw in iteration 1 assumed the AMM pools were in sync with the oracle. As these are two separate markets this allowed shift between these two values to be manipulated. Introduced in iteration 2 was the concept of interest free protocol loans. When collateral is provided the system mints an equivalent of Stable Credit for the collateral provider. This means the system equilibrium is 1:1. However, at this point, the system can’t make the Stable Credit market (required for peg, creating velocity, and increasing fees). To allow the system to create the market, it creates an interest free loan of Stable Credit equivalent to the required amount to make the market. …
Disclaimers: yCredit is experimental. yCredit is not a speculative token. yCredit can be economically exploited.
Built off of the original stable credit, yCredit allows users to deposit ERC20 tokens and receive a 99.5% USD based credit line represented via the yCREDIT ERC20 token.
If you deposit $100 worth of AAVE, you will receive 99.5 yCREDIT. If you burn 100 yCREDIT you will receive your AAVE.
Yield
Every deposit, trade, swap, borrow, or repay incurs a 0.5% fee. These fees are distributed to any user that stakes yCredit in the yCredit contract.
yCredit above peg
If yCredit is above peg, users can profit by minting yCredit and selling yCredit for the relevant ERC20 that is above peg. …
Not sure how many of you out there have put together a business plan and tried pitching to VCs. One of the key questions (other than who the team are), is “who is your target demographic?”. This is such an easy question to use to weed out who are serious and who are fake. The “fresh out of college with an idea” answer is, “everyone”. …
It took me awhile to understand Cover Protocol, in this article I will try to simplify what I have learned to help facilitate the 3 core user types;
- Coverage Seekers
- Liquidity Providers
- Prediction Market Users
We are also working on some UX changes via yearn to facilitate these distinct separate flows for each use case, but while that is busy, I hope this article helps.
Coverage Seekers
As a Coverage Seeker I want to buy cover for a fixed period for a protocol I use, to protect the capital I have in the protocol.
When you go to app.coverprotocol.com you will land on the following…
Keep3rs role in the ecosystem is simple, help coordinate keepers and jobs for better overall system health.
As with any ecosystem, there are small jobs, that might not require as high security, and there are critical jobs. Keep3r’s niche has been the small to medium sized jobs, these are for organizations that might not have funds available yet, or simply want to experiment about what they build.
To use a comparison, when you are starting to build a small business, you are happy to store client payments in your safe at work. …
I had been outspoken in the past about the things that Sushiswap did wrong, but I cannot overstate how much they have done right. In the past weeks of interacting with 0xMaki I have developed immense respect for their character, their capabilities, and their execution. Boring, has given me a similar experience, and shown me to be an incredibly strong, motivated, and talented developer, quickly catching mistakes that I did not notice. These two alone would be invaluable to have along for our mutual journey, yet the Sushiswap team is so much more and they will continue to grow.
As Sushi focused on expanding their AMM ecosystem, and as Yearn focused on expanding their strategies, more and more overlap became apparent, Yearn needed custom AMM experiences for their strategies, and Sushi started pushing the boundaries of yield and money markets. …
