LidoDAO and LayerZero wstETH Saga and dYdX Mainnet Launch | Analyst Round Table

Transcript

aam trades at a 1,000 price of earnings ratio today so if you turned on like staking for sequence of profits that would be 0.1% staking yield a year you know and and now if I'm very used to like 10% of staking yield after one year and AR's like oh my God guys we're going to be the first L2 to turn on AR staking for sequence of profits and additional bonus 0.1% on the 10% you you're getting be like oh my God that's so lame I'm out of here I don't know I think you guys are mid curving this I'm definitely right I love that hey everyone Sam and Dan here and before we dive into today's episode I

wanted to shout out metamask portfolio are you always constantly stressed like us managing your portfolio across different chains wallets LP positions pers positions I'm excited to tell you about metamask portfolio which lets you manage all of your crypto assets across different networks wallets all in one place do more with web 3 your way with metamask portfolio you'll hear a little bit more about it later in the show what's up everyone welcome back to another episode of zerx research before we dive into today's episode a quick word from our sponsor hexin the most hardcore security team in web 3 pioneering in ZK and novel cryptography hexin is trusted by tier one projects like polygon mantle risk zero Li 1in new bank and more check them out on the ground at defc connect and be sure to

mention zerx research when requesting a quote and you'll get a free webtube pen test with the purchase of your audit what's up everyone welcome back to another episode of zerx research we've got an awesome analyst Round Table episode lined up for you today uh today is October 30th and we are joined by Brick and ren from the blockworks research team you also can use code 0x research10 checkout when signing up for a blockworks research subscription at blockworks research.com we just put out two awesome dashboards one highlighting the token migrations for dydx and poll uh as well as a new ZK sync era dashboard so be sure sure to check those out if you sign up using that code0x research10 we will also put a link to

that stuff in the show notes but uh Dan do you want to walk us through some of the biggest movers and losers of the week yeah for sure for sure we got a good episode lined up so excited to kick things off so on the Mover side of things we got some uh we got some token burners this week uh so Pepe will start off with the meme coin side of things Pepe burned 6.9 trillion tokens from a multi- on October 20 uh 23rd and that's about 1.6% of the total Supply roughly at the time it was about $5.5 million USD um and the token actually jumped 31% following the burn now this was actually timed pretty nicely with the markets heating up a little bit as they have over the past week or so um but the the token is still up about

80% in the past 14 days and the team still holds 3.8 trillion tokens which is now valued at about five million so uh interesting to see a little bit of a burn narrative you know last time brick was on we did get some uh some discussion around how useful is token burning um as when it comes to like a revenue return mechanism but uh this is a very different type of burning where it's just like kind of removing team tokens from circulating Supply um so definitely I think partly why this was perceived differently than the market I don't think anyone's looking at Pepe for any fundamental reasons but if you remove tokens from the circulating Supply that's just going to be this this uh bullish Catalyst that Traders are

going to want to kind of jump on the train of uh so Pepe making serious waves in over the last couple weeks and this could be a reason why some of that action has been occurring on the other side of things we have thorchain which we've discussed at length on a couple different podcasts as well as had Chad bareford one of the lead developers in that ecosystem come on and describe you know the protocol as well as its new lending mechanism more recently and that lending mechanism one of the pieces there is when new borrows or new loans are opened uh Rune the token the native token of thorchain is actually burned and so about 1.5 million Rune has been burnt since the lending protocol launched a few months ago uh and while that's not a huge number in

terms of total Supply there was originally 500 million uh Rune tokens in circulation um so it's it's still like you know less than about a half percent uh it's actually kind of being this again you know it doesn't always have to be a huge amount of Supply to create that narrative around like oh like you know there's this protocol is burning tokens let's like put an extra eye on it um and again because this Rune is burnt through lending activity you know we're still seeing bare market levels of activity when it comes to the amount of Leverage people are taking on chain um so you know one and a half million over about a month and a half or so and what is hopefully towards the end of a bare Market is still pretty good and so if you kind of fast forward that out I

think is what most people are doing here and saying okay well if we extrapolate that level of activity into a Market when you know people are a little more willing to take onchain leverage you know maybe that's an exciting a little bit more of an exciting number and even burning like 1% of the total Supply at about five million Rune that' be a pretty interesting metric to kind of keep an eye out and follow uh and again this one is kind of parlaying into price action as well with thorchain up about 3x off the lows and it's really been just on a run since the lending protocol itself launched um but one thing to note here is there's definitely some a bit of a regulatory overhang you know they're trying to do bridging in a way that nobody else has which isn't inherently bad but there's

an interesting kind of dilemma that gets faced if you're really really good Bridge um you're going to have elicit activity take place and that's kind of been something that's plaguing Thor chain for the last couple weeks we saw some lazarist what is believed to be Lazarus wallets kind of uh moving over thorchain from ethereum to bitcoin and then hitting some Bitcoin mixers so it's like you know bit thorchain wasn't the one actually obus skating the identity of the wallets because you can see the destination and Source chain uh wallets in connected to uh but it was it was like this highway that was used in this uh exploit so it's kind of like this interesting thing to keep an eye out uh the largest front end Thor swap actually kind of had a response to this

regulatory kind of over regulatory pressure token is is looking pretty damaged there honestly from from where it's ran up along with thorchain uh to where the regulatory overhang kind of took took impact and it really only hit the front end side of things which is thore swap um so something to keep an eye out there but the top movers are are two interesting categories that are both in are two interesting protocols that both fall within the burn category I can talk a bit about uh losers so I think fch was one of the larger losers last week you know if you combine three three and like an exponential pricing curse once that starts to unravel that unravels pretty damn quickly so there were a few days last week where for the first time Act

sellers were more than active buyers um I think there was a day specifically where 84% of the volume was sell volume and that's a lot you know um 219 out of the top 250 Keys FL in price um TV peaked at 51.5 million roughly and is currently sitting at 44 million you know ever since fch launch you've seen clones launch on every single chain to be honest I think the most notable one was probably stars aren on Avalanche in a bad way because of like the uh consecutive exploits that it sort of received and the bad publicity but I I think this is always bound to happen it's kind of what you get when you apply like an exponential pricing curve to

like being able to trade keys or shares of individuals um I I do still like the idea I think it's definitely fun for people um to sort of like take part in these like private chats that you can only do subie by keys and then there's been a lot of of Innovations around FX you know um there's one on Linea which had like um I don't know what um but yeah it was basically like new interesting mechanisms were introduced on top of like the core f. Tech mechanism and I do think there's like more room for experimentation maybe the next B market I wouldn't be too surprised if there's like one more like City social f app that like just becomes huge for like a prolonged period of time uh Sam you never capitulated and

got on Friends Tech but brick and ren I know what my usage if I plotted a chart of my daily usage of friend Tech I know exactly where what direction that line is pointing but I'm curious are you guys still super active on the app no not really to be honest I don't think I ever was like super active um I didn't have like that many followers compared to like some of the other analysts on the team but like I was in there for like a bit like probably like one or two weeks I was like but something more active and then after that I was was like I can't be bothered with this yeah pretty much the same for me I don't know there's just nothing to do on the app or it's like such a hle you kind of have to force yourself to go to the chat

and like talk to people and I don't know there's just no way to like naturally retain users I feel like because you can as well just go on a I don't know telegram group or whatever create that and then have the same experience or even better experience because at one point I also got tired of the app since it didn't load it signed me out and there were all of these frictions which like quickly deter you from using the app if that makes sense yeah yeah and it's like I feel like with a social media app you have a like a window of opportunity that Fades rather quickly and it's like if you can't create a sticky user in that small window then you might be so because a good example of that is uh be real there was like an

article on circulating around Twitter I cannot remember where I saw anything about this but or who wrote it but just like talking about like I used to use B every day I thought it was so fun and then like once it got boring I I couldn't I haven't opened the app in months and this kind of like that great example of like if you can't create a sticky user then they're going to dissipate really quickly uh which is in contrast to something like Twitter where you know everyone kind of has built a at least on crypto like there's such a community there that I think is really that's what keeps me coming back and I think it's really hard to replicate that into a paid environment like I don't want to have to pay to go talk to my friends like that like so I'm never

going to connect with my friends because I don't need to pay them so then it's like how do I kind of Kickstart the community aspect of things if I don't have like my core group of friends to go you know just jam on ideas with so I don't know yeah I I always felt like there was something somewhere with friendtech but its current form was never really like overly intriguing to me Clubhouse is another good example of that too like and then Twitter just went ahead and Incorporated spaces and then that happened died in like a week so definitely agree with you there Dan I do think they get a little bit too much slack for the like exponential bonding curve especially once they launch a token because if I'm not mistaken and correct me if I'm wrong but I believe it's like 20% of the fees go to like

protocol Revenue so I think that volatility is actually really good especially once a token launches because if they do some Ponzi nomics and buy back the token and burn it again they'll you know they'll probably be a conversation in the movers at a future date so I don't know I think it could definitely be a good time to start looking at it again while everyone's kind of down on it um in the anticipation of a token being launched based on their points in like four or five months I think it was only 10 10% but I'd have to go back and look as well because I think 20% was taken and then like 10% went to the owner of the keys and 10% goes to protocol treasury I I'd have to double check though I'm not

entirely positive I think it was um 5% and 5% okay I will clarify that I'm also not too sure and yeah as far as like the points program goes you know like I think this trend first got started with on salana with like margin F and then a lot of other protocols join the points gang um yeah I know one of the analysts on our team fibos feels quite strongly against points program uh I'm like kind of in the middle on one hand like it's a really good way for protocols to not commit themselves to like certain airdrop parameters or even like air drop itself and just like kind of like tease an air drop but now like without having

the intention to do an air drop and so you move like one step forward in their process of like teasing points but also on the other hand I also don't really like I think with a lot of these points programs you've seen that even if users have contributed a lot to like protocol growth or whatever like vanity metric that the protocol likes like in the end users are getting a very very small percentage of like the token Supply and it like it didn't it's not impactful enough for like the user that like contributed to the protocol and just to set the record straight Ren Ren is correct there's a 10% with split five and five between the key owner and the friendtech treasury I mean still though I mean everyone's talking about how bad it's

doing yeah and that you know they had $100,000 of fee Revenue the last 24 hours I just pulled up defi llama and I mean that's that's nothing you know top 10 top 15 over the last 24 hours and that's when everyone's pretty down on it so I think inserting a token in there could definitely uh reignite the the interest I just think people have attention spans of goldfish and crypto so it's gon to be a couple more months before we see that yeah and ran I know you just mentioned pibbles distaste for points programs as a uh seasoned airdrop farmer but from the protocol perspective I mean I agree with you man like should you really be giving out out such a large portion of your token allocation at as a onetime airdrop and like I tend

to think the answer is probably no um there's like two different sides of that right like Unis SW swap did a pretty massive a relatively large airdrop um and then one of its competitors curve took the opposite approach we said we're going to give a very small airdrop but we're gonna have a very very large ongoing incentive program um and of course Unis swaps kind of been the monster there but it makes you wonder like is how pivotal was the airdrop in in their success and there's actually a uh an upcoming speech or a talk at duncon exactly on this topic it's like how airdrops have changed the through time and like you know how pivotal are they to a protocol success so I guess this turned into a little dunon shill but uh definitely excited for for to

kind of listen to that one and if you're in if you're gonna be in dunon next week definitely reach out to either myself or or Westy we're going to be there and would love to uh meet up and uh talk crypto what's up everyone as we explore today's blockchain landscape let's take a moment to recognize hexin the premier cyber security provider in web 3 hexin is trusted by tier one projects like polygon including a Security review of the new polygon DK evm mantle risk zero Lio 1 in newbank and more get a deep dive into your technology stack with the most comprehensive analysis in cyber security Consulting with over $55 billion secured they cover everything from Smart contracts to blockchain to web two pentests there has been nearly $7 billion of total value hacked in crypto's nent history so it's safe to say that your team has a lot on the line

don't skip out take your security seriously and choose hexans don't forget to mention 0x research for a free web Tu pen test with your partnership and you can reach out to hexin at hex.io or find them on the ground at devc connect without further Ado let's get back to today's episode it's probably a good time to to jump sections here and keep the ball rolling with a governance update uh so a couple good things going on one of them is arbitrum staking which when we say staking in this context referring to just taking a token um and putting it in a reward Bo contract so you're not like actually a security staking if you will like you would with say Stak eth and so there's a proposal up where the yield can either be 1% one and a half% or 1.75% um in the form of the total

arbitrum Supply and it will initially use an inflation mechanism but that can be altered to like say the Dow treasury because there is the arbitrum token itself has the ability to turn on uh like new token issuance and I think that's up to about 2% % per year and so even if let's say like the uh proposal was passed at 1% that would just be a 1% total infl total Supply uh increase which if obviously if not every token was staked into this contract then you would be earning an outsized portion of the reward so 1% could go a lot farther than for the on the actual end APR um so just something to keep in mind there but

kind of interesting because this could create a little bit of a supply sync because you do have to time lock your tokens into this into this contract um as it currently stands again this is just in the proposal phase uh and the max lock is up to one year so curious to get everyone's take on this because right now like I guess there's a couple different ways that I see it like all right let's assume that it's like you know if it's anywhere between one and two% of uh you know total total token Supply that's really not a huge number but if it's coming from like new inflation or even the Dow treasury like how useful is that to the arbitrum Token I think my one sentence takeway is that it's so stupid like by locking up your up tokens into this

reward contract you are literally contributing nothing to I guess like any set of stakeholders to be honest the foundation the Dow the ecosystem maybe people that are like trading are and holding it in hopes that like your supplying will offset some of the inflation or like this Supply like becom C culating or liquid ones like DS start using those for liquidity incentives or whatever but my take is that like it's very pointless I feel that the mechanism isn't that bad especially if it's such a small percentage of the total Supply like it's always better to do something than just let it have uh rest in a treasury or whatever like uh without doing anything

and even if it comes from inflation I don't know I don't really have a problem with that it's just a good way to get tokens to lock up uh and if they really don't have anything better to invest in at the moment like it seems that super popular thing to do right now is just like give uh grants to protocols which is also debatable like how effective that is in the long term I would say my main tip with with it is honestly just like the the inflation rate based on the total Supply as opposed to the supply actually sitting in in users wallets like I can't remember the max Supply off the top of my head but there's really not that much

Supply circulating especially if you um kind of exclude the the ARB that's just sitting in the Dow treasury like if you look at just the ARB sitting in liquidity pools in in different different individual users wallets that inflation is actually going to be a lot higher than than one one and a half or two% sounds on paper in my opinion so I get the motivation to get people to lock up ARB so that way the price pump shortterm the value of incentives goes up shortterm but I think long term I don't know if that's really the best thing ever like I feel like they should maybe wait until there's a mechanism where ARB staking is actually needed to maybe decentralize the network you know participate in fraud proof resolution or something along those lines other than just handing out tokens for the sake of

handing out tokens yeah Sam I think I wholeheartedly agree with you there but brick I want to get your a abuttal but before we do that I just want to put some some numbers onto exactly what you just said so if if you did so if 50% of the total circulating supply of arbed right now was staked into this contract and and there was just 1% of inflation was passed so they're going to do 1% of fdv inflation and half of the total circulating Supply was staked that would equate to about a 16% APR staking yield so that to your point like there is a big mismatch there and that does create like a larger number so you like you take this 1% inflation that everyone will feel and you can kind of make a

really interractive Supply Sync here but like again like how useful is that like why do we need to do that what is what is the main drivers and brick I'd love to get you to expand on like why this is beneficial to maybe ARB token holders and you know the Dow as a whole I mean it's just another way for investors to earn a yield maybe I'm thinking about this from the like wrong perspective but as an investor I feel that I can either participate this in this or not and it's my own like decision I don't get inflated if I don't uh like want to get inflated if you know what I mean I get what you you

guys are saying that it might not be a good long-term uh like driver for the protocol but okay what's the alternative them what else can you do at this point I would say maybe you don't need to to do anything right now now like the sequencer is making a couple million dollars every quarter if you wanted to do some sort of like Revenue share like I think that could be a more interesting way to do it of course you probably have a lower yield than you inflating your token by 1% which in the grand scheme of things isn't very impactful but it's just like I don't I don't get the why here like okay yeah maybe this makes price go up and that's good in the short term but it's see it seems a bit it seems like a like a circular error here like

oh we just issue new tokens to our own token for no particular reason yeah I also think like no one's looking at say with like a 16% staking yield like if you were going to sell op tokens you're still going to sell it like even with that 16% staking yield I think in terms of like Supply Dynamics that's not going to change someone's decision about whether they're going to buy or sell orbitum tokens that much like if I have AR sitting in my wallet today and I was going to set it I'll set it it's not like I'm going to see this propos I'm like okay maybe I'll get like 10 to 16% staking you and I'm not going to sell it maybe I'm mid curbing this but I don't think it was that impactful for like the

average like investor decision that plus they're gonna have like okay if you fast forward to the long term there will be some sort of like decentralized sequencer and if you really think like zero knowledge proofs are the way then eventually they're going to have to have some sort of approving system uh and both of those things will over the long term need to be decentralized so if that's the case and we're going to have to have an actual service that gets uh incentivized then I would want to save this inflation for actually performing a service to the protocol like uh incentivizing a decentralized sequencer for example then like that is a Ser you're performing a service it's related to the security the network and that should be incentivized through inflation so that could like that's kind of the way I would want to see new token

issuance being used as I'm thinking about it right now I was going to say I I think it's a great way though to if you want to do that in the long term this is a great way to start and kind of manage expectations um I've been lat looking at link for a bit and I feel they're really good at this where they're like um even though they're uh Native token might not um crew as much value as everybody thinks or whatever they're really good at like managing Market Expectations by making this like super forward looking optimistic outcomes and in a way I feel that this could be one of those things where like if no arbitrum does it themselves like the community starts

spinning up this um Narrative of like okay they're introducing staking now when are they going to decentralize the sequence or is this going to be like a new Revenue uh opportunity for us and then it like spirals from there and as I said I feel that if it's really 1% of the total Supply a year I don't feel that that's a bad cost or like it's a good risk return investment in that way all right speaking of sort of setting expectations then you know like right now this expectation is I think like even if this goes through even in the most be scenario let's say staking yield is 10% right then you sort of said that as like your Baseline expectation for R

staking and for example if you turned on staking for sequence or profits today right AR um checking out analytics dashboard which you should definitely definitely check out um Aram trades at a 1,000 price of earnings ratio today so if you turned on like staking for sequenc of profits that would be 0.1% staking yield a year you know and and now if I'm very used to like 10% AR staking y after one year and AR's like oh my God guys we're going to be the first L2 to turn on AR staking for sequence of profits and additional bonus 0.1% on the 10% you you're getting like oh my God that Soul name I'm out of here

right if anything I think like that may be slightly bear in terms of setting expectations I was just gonna say basically like you're discouraging activity by just telling people hey lock up tokens to earn more tokens it's like if you really want to improve the entire ecosystem increase sequence of Revenue like it would make more sense to like have people LP usdc native usdc because right now usdc has a bigger market share than native usdc with ARB and then you lock up those LP tokens so there's more liquidity and then you can get rewards there like there's a lot of different things you can do that actually benefits the entire ecosystem more than just all right guys here's your free risk-free 20% yield on ARB I don't know I think you guys are

mid curbing this I'm definitely right I love that energy but uh if we if we leave we'll leave things there for now and maybe check back once this this proposal gets a little closer to maybe if you hit a snapshot but we we'll revisit this and see uh kind of where where the Dow decides to move but uh moving on on the governance updates we have an interesting one for CRV USD so curve is actually discussing very much still in the ideation phage this isn't like uh I would say this is like very much an emerging proposal very in discussion the community is still saying like hey is this even a good idea but they are thinking about Distributing protocol Revenue as CRV USD so to give a little background here uh for those who are a little less familiar with the

Curve ecosystem and kind of how it works protocol revenue is distributed to ve CRV token holders to get ve CRV you have to take regular CRV tokens and lock them for up to four years um and so 50% of all Dex fees go to uh token lockers and 100% of all fees from The Lending Market go to the Token lockers today those fees are aggregated and then distributed to those uh vecv in the form of three pool LP tokens as I'm saying this it is so painful to say like all these acronyms loud but here we are this is this is what we're this is what we're working with um so it gets Consolidated into the lp token of a pool that contains usdc usdt and die all that really is to say

is you're basically getting your fees protocol Revenue distributed to you as stable coins um and so right now the current yield is about 4% and and it's kind of non-trivial to change the token to be honest because basically what happens is especially on the the um Dex side of things but even on the lending Market side the fees get paid in a variety of different tokens so like when you swap um let's say eth to CRV like that the fee payment will either be an eth or CRV and that ultimately needs to get swapped into a stable coin to be distributed to the ve CRV lockers and it's kind of nice to be getting your fees paid in stable coins

it's kind of what uh it's it's definitely different than you know saying like oh we'll buy back CRV and distribute that to the Token holders and like yeah maybe that's good for CRV price in the short term but like people want to be paid in something useful and largely that's stable coins today or maybe like eth as well would be interesting and so the reason that the community is kind of discussing changing the fee token from this stable coin LP position into CRV USD which is the protocol's native stable coin uh is really to create additional and ultimately demand uh utility and demand for the stable coin and that's really really important when you're creating a stable coin because ultimately market cap is a function of how many people want to hold your stable coin if even in

a lending especially in a lending design based a CDP based stable coin where lending must borrowing and lending must occur to Mint new tokens if the price of your stable coin is falling then you're going to see people redeeming their loans oray buying it back and redeeming their loans which is lowers the market cap if you're looking at stablecoin market cap it's it's truly just a function of the demand to hold your stable coin uh and obviously price is is very important in this equation and so the how this kind of creates more demand for the token is it's creating like a systemic buy pressure on the token which ultimately raises the price um and the buy pressure is not necessarily a small amount curve token I just pulled up coin

gecko here um so I honestly want to double check how accurate this is but it says in the last 24 hours there's about $15 million of trading volume on the CRV USD token and there's roughly $325,000 of weekly fees and so that is all getting converted into three curve which creates buying pressure in the three pool and if you're putting that directly onto CRV USD then any fee that is collected in a token other than CRV USD will need to be swapped into CRV USD so it's creating that systemic weekly by pressure um and that's also presuming that the token holders that are currently being paid in a combination of usdc usdt and D are willing and excited

about being paid in CRV USD instead um and it kind of has like this twofold impact on on the token I would say so curve has a really really interesting interest rate model where the price of CRV USD is a factor in the current interest rate paid by borrowers so it's not a function of governance at all governance can tweak some specific parameters but like the rate will uh freely update on its own and so a a higher CRV USD price will directly lower the the fees paid by borrowers by Shifting the equilibrium of the rate curve and it will indirectly lower the interest rate by activating Theos in the curve ecosystem which will automatically deploy Capital into the pools and that

Al then the act of deploying Capital into pools also decreases the current rate so it has this two-fold effect on not only decreasing the current interest rate paid by borrowers but also kind of creating this this systemic demand for the token and KV seen some great success with its its new lending Market here uh I think the total Market Cap's up to about 128 million as of today and it's really been on a it's been on a great pace and so it'll be exciting to kind of watch this see if it has any major impacts on uh on the stable coins growth I know we talk a lot about go that launch at a s similar time um we talked a lot about go the other week so we won't kind of try to make the comparisons here but curious if you guys have any thoughts on curves lending

market after I just spent that time rambling I got a question um and this might be a dumb one but does the interest rate ever go negative and then if you're paid out CRV USD is that fine to just hold in your wallet like you're not getting charged any interest then on top of that obviously you don't want a a dpeg to the upside and then screw borrowers over who then have to buy back that CRV USD and then repay their loans so I guess that's kind of loaded but how does that work great question so three questions no the interest rates are ASM totic to zero so they cannot fall below zero uh the second question the only people that pay uh interest in the system is are the active borrowers so if you just like went to a liquidity pool and bought CRV USD if you're just

holding a stable coin you know similar to holding like die when the token dep when the stable coin deegs to the upside that actually allows Theos to kick in and then they will basically sell uh unbacked CRV USD into the pools and that lowers the price um um I say sell but they're really just making a one a single-sided deposit of CRV USD so that like brings the pool back into equilibrium um which is what they call like deploying debt into these pools and so that the act of deploying debt based on the interest rate formula actually lowers the rates paid um so deploying debt is good for low rates that's pretty cool do you think

there's any big risks of this like d pegging to the downside because um if I remember correctly the big quote unquote big uh dpeg a couple of months ago Theos always almost ran out of like Capital to buy back the stable coins and if that would have happened then the only thing that's uh anymore like defending the peg is the interest rate mechanism right right yep that's exactly right so the MOS are only useful for dpeg the upside just as like a PSM is um until it's empty then there's nothing left to to kind of sell and and try to

fight back uh when things dpeg to the downside you're left with two things like like an interest rate mechanism to kind of incentivize activity and Arbitrage yours Arbitrage from borrowers right because if I borrow something at one and then I sell the stable coin and then let's say a huge dpeg happens and it deegs at 80 cents let's just make up a number then that when I go repurchase I can buy what I sold for $1 I can buy it back for 80 cents basically like you're going short the thing you're borrowing effectively and so you're that's one method and the other one's the interest rate mechanism right and so when the Deep stable coin deegs to the downside interest rates like hyperbolically increase and so if you get like a material dpeg you're going to

see a very very large number in interest rates and there's a cap of course but like d pegging you know to 9995 is like you start seeing material movement in the interest rate okay maybe I misunderstood the mechanism then because my understanding was that Amo start closing their positions which decreases the stable coin Supply which should bring the peg up again but I mean I guess it depends how you count stable coin Supply personally when it comes to like CDP stable coins I would really only count the circulating Supply uh that is like from actively borrowing the stable coin like I mean the pay keepers deying tokens like if I wanted to know the adoption and traction of a protocol

like I I wouldn't be interested in how much debt they've deployed into these pools yeah makes sense but the total Supply should still um have an effect on the price right uh total Supply no just price fra blls and shambles after that comment Dan I could take this a last governance update if we're uh ready to move on past curve so osmosis just passed a proposal to incentivize dydx liquidity uh the pool will have a 05% swap fee and the proposal suggests allocating 200,000 osmo tokens towards incentivizing LPS there that's about 70,000 us um and it's over 50 days so they would need to see roughly 140 $150 million of volume in order to make back

that spend in osmo tokens to uh um essentially make it a worthwhile Venture I personally love this I think there's going to be a ton of ARB opportunities between the eth uh dydx coin that's locked in the bridge or circulating over uh on ethereum versus the stuff that's going over on in Cosmos land so I expect a bunch of volume here and I think it'd be pretty good for osmosis in terms of pumping their volumes and fees but curious if you guys have anything to add there I think um just a few things that just briefly come to mind I think liquid steak dydx is going to be a pretty big thing so I'm not sure whether osmosis is incentivizing like dyx Equity or like Stak dydx Equity but it be interesting

to see the Direction they go um I know roughly $50 million of dyx has migrated over from ethereum so far and the reason I know that is because Dan has built a great dashboard on our analytics to so if you're interested in how that's going definitely check that out um but yeah I think I'm interested to see like whether for example liquidity for Stak dyx will be more than dydx and then just another completely random thing that comes to mind is if you're a centralized exchange and you're hold like users balances and dydx like do you also Bridge all of that to like the new like app chain or what do you do there I actually have no idea you'd think that they'd migrate the

tokens to the you know proper token standard but maybe they'll be like the last ones to do that uh but not completely sure that's a really good question yeah I like your point about the stake dyx I I agree I think that's going to be a pretty hot token in the in the cosmos d ecosystem but uh it's definitely a good move right if you're a deck you need to fight for liquidity and I don't know but I'm really curious what's going on on some of the Dex is on Neutron like astroport that's really seems like it's going to be the main rival to osmosis in terms of who's going to win the liquid liquidity Wars for major assets over there um and so yeah I don't know how that's going like I don't know if they're they're making a push as well but dydx is like probably the most

exciting defi asset in the cosmos ecosystem now and would be very interested to see kind of what that looks like um and the the token migration think pretty interesting so we've only seen about 5 uh 5.9% of the supply migrate over and one thing I'm interested in is to see if we get any like weird price mismatches between the eth version and the cosmos version as a more meaningful amount of liquidity is migrated from eth to Cosmos because there's like an arbit there's a really easy Arbitrage if if you need to move the asset from eth to Cosmos but it's a one-way Bridge so there's no going back um so like I don't know how that like how you'd kind of reeg it if the uh if

the eth asset got like crazy whack out of price so I don't know definitely something I'm keeping an eye on I don't think I'm gonna be like trying to make any plays or anything by any means that's definitely not Financial advice but just as like a data junkie I'm really curious to see how those two prices match stride as well also put up a governance proposal uh on the dydx forums to basically I I can't remember exactly what the proposal is but they're trying to get the dydx LST live for them so that way they can start capturing some of that market so that's another governance update to to pay attention to all right everyone let's take a moment to hear about metamask portfolio if you're like me and Sam managing your crypto assets across different wallets and networks can be so overwhelmingly complicated that's why we're excited

about metamask portfolio all you have to do is connect your metamask wallet to get a bird's eyye view of all your coins tokens and nfts in one place you can easily Buy sell swap bridge and state crypto assets at competitive rates all within the app and you get to choose for vetted list of providers there's no more jumping between dozens of sites and apps metam Mass portfolio lets you do more in web 3 your way giving you secure and convenient access to a wide range of features and services all within one place manage your portfolio your way with metamask portfolio peep the link in the description of today's episode to get started now H should we move to Hot Seat cool Throne let's do it all right Ren kick us off man sure this week I have uh L zero in the hot seat I

especially wore my L zero shirt for them um I don't think I put them in the hot seat to be honest but Lio DA has definitely put them in the hot seat so on October 5th H sorry on October 25th lar Zer announced that rap stake th is now available as an of on binance chain scroll Avalanche and ethereum for those who need a refresher of stands for Omni chain funable token it's sort of this like Crossing token standard that allows tokens to be minted and burn through the layer zero Bridge um so obviously rap stake de just like a rra version of Li oal Stak de and basically what layer zero has done here is expanded rap stake de access to all of these l2s and these

side chains right um and it enables these ecosystems to basically use rap s for um Sak def um in their like defi ecosystems it's gotten a lot a lot of push back so far because what layer is did was on the day itself they posted a forum Post in the Lio forums saying that they will give ownership of the raps th contract the LI of Dow upon support and in their marketing material mostly their tweets they use statements such as rapake de is now integrated with layer zeros of standard or for example um this will enable respective defi ecosystems to flourish while supporting Lido's desire for chain expansion so you know

if if you you if you were reading these tweets you would maybe walk away thinking that this was like a big partnership between layer zero and Lio um that they've been working together for like a long time and hatching out like the security concerns does Li want to use l Zer as canonical bridge for um rap safety but that's not what has happened here layer zero has sort of independently gone and basically announced that uh rap 6 will not be available on all of these l2s and so I think most of the push back is that there hasn't been a lot of time for the Community to sort of discuss what bridge rapake de should use um for example across's co-founder was like absolutely livid in the forums and his treats like

he was like ready to like go on a podcast and just like fight it out with ran from L um and basically like people are scared that the security of lario isn't enough for a token that's so important to defi it's probably like one of the largest market caps today and hu especially right hassu is Chief strategic head strategy for Li and his comments in the Forum were like very very heated you know like he says he was speechless by what he's witnessing here uh the parties involved burned a lot of Goodwill there were a lot of sketchy sales tactics involved and by unilaterally deploying a bridge and marketing it in an official seeming way

you're trying to pressure the Dow into accepting and avoiding liquidity fragmentation so yeah just a lot of pushback in as a whole I think l wants to avoid a scenario where users think that layer Zero rap STI def is the canonical version of rapti Def on all of these chains and probably another Ser scenario that they're trying to avoid is liquidity fragmentation the last thing you want is like layer zero rapake thief and then Lio raps thief and then across raps thief and then like sinaps R like that's like a pretty like horrible user experience that I'm sure we are all too familiar with with like 10 different different versions of like USD C's on like some random chain um so yeah a lot has happened since then in coordination

with scroll Stargate or layer zero has actually removed the bridging of rapic De into scroll um even though they were one of like the early l2s that got announced um but my my general takeaway here is that this may be a bit controversial layer zero didn't do anything wrong you know like it's a permissionless world and we're all living in it rap stake th is a token Developers can integrate it however they may choose to sure were some of their Communications marketing like slightly misleading could they have like put out more disclaimers definitely you know they could have say this is not like the official rapti Thief it's just our implementation of it we haven't gotten Lido's um like support official support

of this but you know like I feel like that's kind of why we're here for crypto right like the whole like permission is innovation people can build on top of each other however they want and it feels like like definitely there are probably like some security concerns you know uh for rap safety they're using Google Oracle as sorry Google Cloud as orle and they're using the default layer zero relayer as a relayer so I can kind of see some like how you would be concerned considering like you don't want like Google Cloud to be sort of like partaking the security of bridging of like one of the largest tokens in defi today but also you know I think it's a free market if people want rap stake def on L2 and side chains then someone will figure out a solution and

someone will implement it you know that I get that Li that wants to take it slowly and like consider all of these like security considerations for these different Bridge vendors but they really got to get to it um I'll stop there that was a lot and I'd love to hear you guys thoughts yeah I think this is like a this is an interesting one because there's like two sets of actions there's onchain actions and offchain actions by layer zero um you know obviously we none of us were on the the calls with with Lio in layer zero about this that sounds like you know according to hu these things may appears to have happened um based on his post about Shady sales tactics and you know I don't know what was said there behind those closed doors but the offchain actions do seem a

little um out of line in a lot of different ways just like from a business perspective but they're on like to your point Ren like I I don't disagree I think they're onchain actions are exactly what you could expect from a bridge like they need to get their form their asset as their assets as widespread as possible um and that's kind of how they're going to do it like you should I would expect every bridge to race to do the exact same thing to be honest like that's bridging is likely a race to zero in fees like most things are um but bridging expect especially I I do think it'll be heavily commoditized in honestly the near term and because of that like you do need to be the widespread most adopted use case um and so go going after very important assets

seems like a no-brainer to me I liked that you mentioned the usdc thing because anyone who's used arbitrum you know there's usdc native now and there's usdc doe and it is a little bit of a pain in the ass but at the end end of the day like it's not a huge thing it's just kind of like you know how the cookie crumbles and yes I think everybody would agree that ux is better with one version of the asset but if you're li like you know you have this really in demand asset you you got to get that thing you like you have to race the bridges a lot of different ways and there's not this great Silver Bullet for bridging software bridging Solutions and it's like that kind of makes the problem worse because people are very concerned about the risks that are associated with

Bridges and for a good reason we we've seen how many billions of dollars get exploited through Bridges um so it's like yeah I think the offchain actions by layer zero are are really what was problematic here because you know we can't brag about defi Legos and then be upset when we see people take people build into that world right so that's kind of where my head's at is they really need should have used better offchain communication with like from a personto person level um but their onchain actions of you know making it an of I I just don't think that's bad yeah I I I don't get this from like business perspective because you're making so much bad will or whatever you want to call it for yourself like now you're messing with one of the biggest protocols on in

defi um a lot of users see this as a bad thing as well and it's clear that as you said there were some maybe op or like shady actions made of chain and this feels like a more of a centralized decision and not like something in made in a crypto EOS if you can call that um which is why I'm kind of against this whole thing or like I didn't like how this whole thing played out I just feel like as Li you can't have your cake and eat it too you can't be like oh well you guys want us to sell self liit no like Market forces will decide like this is kind of the same thing if you ask me I mean if the oft

token that they create and launch doesn't have any demand then boom you're fine doesn't matter right what am I missing here that's a good point yeah again I think that's like that's true but then you also can't be layer zero and make it sound like the official supported Bridge like that's a little shady um and of course you know there's a good chance that that was just a social media person trying do their job like there could be no malici malicious intent behind that I I don't know but I think it just come again like I going to keep saying this but I think it was just their behavior behind closed doors and then marketing it as an official Bridge like I I definitely disagree that that was an appropriate move yeah I think the way I look at it like if I was a bridge

protocol founder if I was lar zero I am not waiting for someone to start a discussion on the Lio forums go through like a thre Monon Bridge assessment process um for something that I can do permissionless you know you bet my ass that I am going to do this and pray to God that there's demand for raps on all of these LT and side chains and hopefully like generate those Network effects um and just like be the sort of like de facto I'm not going to say canonical but like de facto like version of R de that people use on all of these l2s and side chains sure like is it like a bit against like the crypto EAS like maybe but I think I think no there right

because you're building with defi Legos you're taking a great product that someone else built and then implementing it in your form and fashion and like that was kind of the first generation of of use case was like oh composability this is GNA be awesome like you can build this great thing and then I can go put it somewhere else yeah and I think after the event happened you know there's a lot of bridges that came out and then to announce like this open Bridge standard right like I think across CER lifi socket router I love all of the teams but they came out with this open brid standard and like coming out with this open brid standard it it feels like all of those like LST protocols with like 0.1% market share saying like Okay for like at sake we're going to self limit to like 22% or whatever when

they're like super super teeny you know um it kind of just feels like you're just reacting to the fact that you didn't have the balls to deploy like your version of raps th on all of these l2s and side chains for layers zero did so I I'm pretty in support of layers zero here and what what they did in terms of like deploying this rap stick defense in noof the only place I think your business plan falls apart is because now when all right there's WRA stake deth on this L2 you liquidity incentives are kind of the name of game for for bootstrapping Lio is not throwing some tokens your way to help kind of bootstrap your tokens uh uh Native liquidity now and so so then it's like

all right maybe there's a use case for the LZ token who knows yeah timing wise I think it's pretty good I'm sure they didn't like do this but I'm sure like there are people still there farming Stargate uh like using Stargate to farm for like a potential ler zero token and now that raps de is a token available on Stargate like I think you'll see like a decent amount of volume and usage brick you want to give us your hot hot seat cool Throne this week yeah I wanted to give a shout out to all the people or all the capital that has been kind of sidelined for a while now I guess there's a lot more coming maybe in the future but um last week we saw around 325 million um dollars come into crypto

and that's the largest week since July 2022 um and yeah after everything that's happened I guess the market feels more fun again like I've never seen or it's been a long time since I've seen crypto Twitter this euphoric and it's kind of funny to see people uh bang heads against each other and like now expectations are kind of diverging like the whole scene isn't or doesn't have the same opinion which is yeah I think that creates a lot of opportunities um but then again like now a lot of the or like the market has pretty much decoupled from the S&P 500

again which has been dropping for the last week so I'm not like sure how long this upside pressure can be maintained um and we're also getting earnings this week um and if some companies start underperforming that could be maybe bad for like the crypto scene and then also we had that uh GDP coming in hot last week which kind of implies the rates will be higher for longer which again isn't the best thing for crypto um but yeah it's great to see and I guess this all started with um the fake BTC spot rumors that started circulating around one day uh recently

and then the market like reacted super positively everybody realized they was fake then came down but still bit of a higher level than before the news so like I guess then people started like kind of this fomo of okay we got to stay in the market now this is like everything's going to start happening soon so let's start taking positions and yeah can't wait for institutional Capital to like really flow into the scene and uh yeah see what happens also I guess that a lot of protocols right now are uh like maybe getting closer to their intrinsic value if you can call that or like uh there's been a lot of playing around with this meme to tokens

for the past two three months but now uh protocols with like good Tech and like a lot of forward looking potential have started to like be become more noticed and I think one of those tokens is Solana or Soul um which around a month ago or month and a half ago was like one of the most popular shorts out there um but now the sentiment has like flipped and everybody is super positive right now um and the token is up 60% in 30 days so we'll see what happens Cu uh this week uh is the largest Sala uh or the largest salanta conference is going

on and historically I guess the performance of the token hasn't been that great after the um conference so we'll see what happens there but yeah haven't been this excited for a while yeah speaking of of salana actually um there are some interesting stats from that coin shares report about the amount of like digital asset inflows salana actually saw more inflows than ethereum over that week salana had $24 million of inflows and ethereum had $6 million of info so like a Forex different and I think that's pretty crazy to see to be honest like by like a very wide margin I would have thought that e products would

have seen more infu in salana um so know maybe like institutions are interested in salana more than ethereum these days perhaps after that vanck report that came out um another interesting stat was the geographical distribution so Canada had 134 million of infos whereas the us only had 37.7 million of infos and if I'm not wrong Canada does have a few spot BTC products and so I think like if you could take away something from that is that there is sort of a relatively higher amount of institutional demand for spot-based Bitcoin products than the Futures based Bitcoin products and I think that builds well for a potential

SEC approval sometime please yeah one of the other interesting things about the salana salana stuff is with breakpoint coming this week I'm expecting a few tokens to have some uh or excuse me a few projects to have a few token related announcements we've seen in points s going on from jto and uh the liquid sing solution and margin fi The Lending platform um presumably points programs eventually turn into tokens and breakpoint would be a very good time to do that you know we just saw Cipher launch its Ido quite honestly that didn't go very well um but that was a bit of a shaky protocol that had a recent exploit and so maybe not recent

but it has a history of an exploit and so that can kind of shake uh user confidence but there was only something like 400 or so users that participated in that Ido and like I don't know if it was geographically blocked at all which I I imagine it would exclude us investors or users but I don't know I I think there's like this lot this building momentum in the salana community and breakpoint is a kind of a good good point in time to have that release of the momentum yeah but maybe also worth pointing out that now some prominent investors are kind of flipping short on salana because they're saying that the right now the long trade is crowded and uh you still have Galaxy holding FDX uh like Solana position which has to

be liquidated at some point and a lot of people are arguing that no is a great place to do it following this like super runup yeah I think that's a good point it does make me a little bit nervous I have high hopes for like the the drift the Goos the margin FS Etc but I haven't really looked into the numbers too deeply lately but it's still feels like there's just not a ton of people over there using that stuff I mean you're still only sitting at like three to 400 million of tvl last I checked and I don't know just like I get over there and I'm just kind of like maybe I'm just stuck in my old ways but I'm just kind of like all right what nft am I minting you know what I mean like that's just like kind of what I've always used

salana for and I feel like there needs to be definitely some work done to like get some of that ethereum Capital over to salana to use defi because that is cryptos killer use case right now outside of stables so I would like to see salana get get a little bit more traction on that front before I get too excited about the points programs and you know who's really well positioned to do that Eclipse using ethereum for settlement sucking in some of that uh eth M net liquidity and then still having the svm where you can presumably we'll see some clones of everything on Sal anything in defi on salana ped over um and now you can power margin f with like a more interesting collateral right like I I don't think margin fies this like revolutionary protocol by any means but now you do get to inject eth

liquidity into your into your system do you by any chance know when uh that goes live that's actually a great call out yeah Celestia mainnet is definitely a preck because they're going to use them for da and obviously you need somewhere to post your da too um so that has to go live first I think we're going to see that before here end though so I would expect that over the you know before we flipped to 2024 that kind of my mental model for that I think Nick white told us that last time he was on the Pod um and so yeah once that goes live I think we can get some of that traction and then yeah we'll see we'll see a live Eclipse you got anything else there Runner brick or uh we ready to move on let's do it let's do it all right I

feel like all I've talked about is dydx now this podcast but my cool Throne is dydx the token is up about 30% over the past two weeks with the code base being open sourced the bridge UI going live today Monday October 30th and uh validator is actively being spun up and beginning to stay tokens there's 76 validators that are set up according to Mint scan but only 60 will be included in the active set to begin with so not sure how that chm process actually works but the important takeaway for investors is basically that all revenue will be shared with stakers uh Slash delegates or delegators I guess um and that'll be transaction fees paid in dydx or usdc or the trading fees that ACR in usdc as

well so kind of a cool play to get uh usdc yield on uh a a native chain asset I'm expecting personally around 5 to 10% yields I didn't realize uh for a little while that uh the standard over in the cosmos ecosystem is that lock tokens Can Be Stak to earn yield and uh participate in governance so I definitely think that will dampen the yield paid out to stakers and then as well over the first six months there's going to be maker rebates of 1.1 bips uh as well as commission rates to validators running the nodes so I'm expecting around around 5 to 10% not as uh good as I was honestly hoping when I was first running the numbers I was thinking man this is going to be incredible but now I'm not

really quite as optimistic it is worth noting that as the dydx price keeps running the value of the 20 million dydx tokens or maybe it's fixed $20 million but regardless the uh incentives kind of increase in value so kind of kicks off this little flywheel where more people will be incentivized to come over keep trading uh earning even higher value of fees um or sorry of incentives and then paying more for fees so it looks good for protocol fundamentals um dydx is impressive I mean it has a 60% market share is still above major per dexes sees 500 million a day in volume consistently no other per decks comes even close to that like occasionally you'll see synthetics rip up to 300 mil in Daily volume or GMX or

one of the others but dydx is consistently there so I think there's something to be said about that I am a little bit worried about users actually migrating over because V3 is going to stay live and I think you know why broke wouldn't isn't fixed is kind of how the say goes so I could see a lot of people just hanging out there uh keep trading there but hopefully the incentives can migrate the volume over I was gonna say I agree um that I think migration will be a slight concern but that like 20 million monthly incentives should sort of alleviate some of those concerns I think one thing that I'm very keen to see how it play out is sort of like me on dydn uh the sort of mechanism today is that

there's going to be like a social consensus me slashing if that's the best term there's no like sort of like inbuilt mechanism I think like uh dydx is working really heavily with skip protocol and they're probably going to have like a counsel to identify validators who are extracting MV but it's weird because you know like a lot of professional Traders will be on dydx they're Market making chance just some of them will run their own validators too and validators will have faster execution of their own trades because you can access like the inmemory order book yourself rather than accessing it through the indexer and you know like I feel like social consensus only works to

a certain point especially when you have so many different stakeholders and so much money at stake like social consensus doesn't really work when there's a lot of funny at stake that that's like my personal take um but yeah that that should be exciting to see but I I think it's okay they can slowly scale that up I know that after their Alpha phase where they're just trying to get as much dydx staked and dedicated they're going to have a beta phase which is just like a limited like trading period where they can test things out so hopefully they can like Smooth those issues out before like it goes for a full launch just to clarify one thing real quick there too the $20 million is fixed in dollar terms and it's over like four to six months not monthly if it was

monthly I would be insanely bullish right now but brick go ahead yeah I was going to ask do you think that it's easier now for dydx if they're able to like migrate a lot of people over to the cosmos ecosystem to get them to stay over there do you feel that they're going to be stickier since they're kind of in a new ecosystem uh and do you feel that maybe these incentives could be like successful because I guess we've seen a lot of incentive programs run out and then Traders just leave the platform my personal take on this and David would hate to hear me say this but um I I don't think it's going to be that sticky you've only got two assets on the platform dydx the token itself which has

a one-way Bridge so yeah don't expect that to go anywhere other than dyd xchain for the most part other than maybe some like osmosis pools or something like that uh and then I also see uh just just usdc um through you know circles cctp so uh ccip got God there's so many acronyms but nonetheless I uh I don't think that people are going to be going to dydx and be Cosmos pilled and going over all these other applications I think it's pretty much going to be a venue to trade and it's like a standalone product that's how Antonio has been positioning it and marketing it as if you know it's not a cosmos chain it's just a product that's really good that people can use that's decentralized that's Community owned um so yeah that's that's just my two cents on it yeah I I agree with your

justification for that take there Sam I got my understanding is when you're on the dydx front end like you're not going to it's not going to feel too much like a crypto app where you like are like oh like this is fun like what else can I do on this subset of uh chains or or applications like you know maybe if you're trading like some dgen thing on arbitrum like it very much gives you that that feel and that's probably a good thing for a general purpose chain too uh but like I don't think it's going to feel like oh you know let me go take this usdc that I have as collateral Bridge over to kujira or osmosis or Kanto for however long it remains a cosmos chain um I I just don't think that that's going to be the feeling that

you get when you use the app I should mention too just real fast the large unlocks there's going to be like 60% month-over-month inflation from November to December with that so that's just another brutal headwind I don't know I I I want to say and I don't think this is public information or anyone actually knows but I would bet a large percentage of these tokens belong to Antonio himself considering how small of a a team it was in the beginning it was literally just him and now it's like a pretty big team but I would guess a vast majority of those tokens belong to himself and just listening to interviews with him it does not sound like he has any interest in working on any project or going out of crypto like he wants to build dydx for the foreseeable future so I could definitely see a lot of those

tokens being staked immediately not sold and then just occasionally diping into the piggy bank and selling when he really needs to but I don't think it's going to be some Giant game over for dyd XL event and I'm sure a lot of investors are hedged accordingly already too of course not Financial advice but that's probably a great way to uh to wrap up the episode as well so you know appreciate you guys for joining Ren and brick and uh we'll talk to you all next [Music] week