The MakerDAO-Aave Debacle: Risks and Rewards of Collateralizing DAI | Analyst Round Table

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I just can't believe that interest rate you said 177% run so you're telling me I can buy usde and stake it and earn three times the amount as doing an under collateralized loan as a lender in an emerging market like that is you're on crack like under collateralized lending on chain is a great business for borrowers and borrowers only like you're insane to be lending on those things before we get into today's episode just a quick disclaimer the views on this podcast by either myself or any guests are the personal views and do not represent the views of any Associated organization nothing in this episode should be construed or relied upon as Financial technical tax legal or other advice all right let's jump into

the episode what's up everyone welcome back to another episode of zerox research the blockworks research team is back to bring you another analyst Round Table this time joined by Brick and Matt from the blockworks research team today is Monday April 8th and as always you can use code0x research 10 at app. blockworks research.com checkout for 10% off your annual subscription ren do you want to kick us off with some news and governance updates for sure thank you Sam first of all happy Eclipse day to those who get the pleasure of doing the eclipse today um starting off the news and governance updates first of all we have a proposal to enable arbitrum stylus on arbitrum 1 and Nova for those that need a refresher arbitrum stylus basically allows developers to build on

arbit using languages such as Russ C C++ and that sort of removes the smart contract development constraints of purely using solidity that most evm So based blockchains have in the past in addition there's some sort of ltip and stip snapshots going on right now um on other news we have a bunch of deployments pancake swap will be deploying on monad pancak Swap is probably live on 11 or so chains today um it'll be interesting to see what deps Deploy on Monet given this sort of like performance and paralyzation and if there's any sort of like anything else that they need to change for the devs if they already playing on there um V Drome

is going to launch his decks on build on bitcoin which is a Bitcoin L2 with evm compatibility I think that one will be interesting to see how many of these ethereum dabs try to hop on into sort of like the Bitcoin L2 ecosystem I'll take a pause there but any thoughts between arbitrum stylus pancak stop and vum launching on this Bitcoin L2 yeah I want to lean into arbitrum Style it's super interesting to me that it largely gets overlooked like no one really cares about stylish sure you see a couple tweets about it but no one really gives it any more thought than just you know uh a passing a fleeting thought but arbit from Stylus is a pretty big deal it pretty much allows any rust C++ or C developer to go code smart contracts on arbitrum and then

additionally they're they're composable with solidity smart contracts so you can have apps WR in either language so when you look at monad which is you know also doing doing innovation in the virtual machine realm it gets so much buzz and hype and VCS are all over and it's got a narrative on Twitter and stylus just doesn't see it and it doesn't make much sense to me and also I want to lean into the ltip stuff a little bit but I guess I'll give every in a second in case you guys have thoughts on stylus keep ripping while you're cooking yeah so ltip is allocating a ridiculous amount of capital to protocols as incentives on arbitrum and once again I think it's overlooked like when stip happened the last time there was arbitrum dowg incentives to protocols it took weeks for people to

really realize oh shoot there's a you know half a million or5 million fdv crypto token that's getting half of its fdv in incentives uh so I do think that it's that it's actually a place that there could be some alpha or some Edge found found uh for those that are you know looking through which protocols were actually funded as a part of this ltip process generally speaking Matt how would you say the stip went were any of the learnings from that implemented in the L tip and on top of that is there any protocols that are receiving the ltip that are particularly interesting for from your perspective yeah so scip is a tough one to to evaluate um if you look at it purely from a fundamental basis of like how much money was spent versus you know

the transaction sequencer the the sequencer fees from transactions you could probably go ahead and say that it was a failure but I think that that's really a misnomer because a lot of protocols who wouldn't have otherwise came over to arbitrum are like oh shoot I want to be a part of this you know incentives process I want some of the I want some incentives from the arbitrum Dow so we're actually seeing quite a few Builders come into the arbitrum ecosystem um for example even though synthetics was not funded as part of the ltip process they were largely interested in becoming a arbitrum focused or at least having some focus on the arbitrum ecosystem and we see this over and over again with other protocols so I think from that perspective stip could actually be considered a win for the Dow in the arbitrum Eos system I

don't want to give any like Financial advice so I would just go say look through the arbitrum Forum post at which protocols got funded and and do your own analysis there on the uh front of vrum launching a deck on build on bitcoin I find that super interesting because the the solidity flywheel like solidly solidly flywheel not solidity has like actually kind of started to take off like we didn't see anything cuz they launched in the the kind of the peak of the bull like beginning of the bear so is like honestly the worst possible time for a solidly type protocol to to launch um so it's kind of cool to see vrum and aerodrum like trading at all-time highs generating all-time highs of fee revenue and seeing

the most volume they've ever seen so I think this is like a really good time especially with the uh the launch of runes here around the having for for vrone to be going over there I'm not sure if they'll actually be partaking in the runes protocol or not I'm kind of confused as to actually what uh what they're building on build on bitcoin which is Bob I think is what people refer to it as but nevertheless I'll be watching that one I think another interesting point about V Drome is obviously they launch a new token arrow for Aerodrome on base uh will be interesting to see if they also decide to launch a new token for their decks on build on bitcoin I my good feeling says no at some point like you can't just keep on launching new tokens for every chain you launch them but I don't know

seems to have worked out for air Dr pretty well so that remains to be seen a few other newsing governance oh sorry Vick go ahead no I was just going to ask aren't um aerod Drome incentives also front loaded or like there's more dilution in the beginning which is interesting if like the token wasn't doing that great in the beginning and now it has still like rebounded out of the um like not in a Perpetual downwards movement but really like starting to take off so maybe this could be another curve likee project where even though incentives all the time coming in they could still like manage fairly well yeah I believe the first 14 weeks you saw inflation

gradually increase or not even gradually like pretty aggressively and then from the 14we period onwards it like decays pretty gradually so I think inflation is actually at the point to where it's going down now um but that being said like there is just inherently a lot of token inflation that gets that gets baked into these protocols so like I definitely would wouldn't want to be holding V or Arrow like in the beginning of a bare Market if that makes sense yeah definitely reflexive both on the way up and on the way down a few news updates on the airdrop fund um tenza season 4 started today ER the claim is open you can go claim and sell if you want uh your tokens I think so

far mixed reactions there some to be like some people that traded like a huge amount of volume and there were like Wheels who like didn't get as as much as they would have thought and a lot of people who like didn't trade much and got more than they thought so it does seem like they utiliz like some form of T system perhaps like it wasn't as tiered as like something like jeto where like there were separate tiers with like a fixed amount of tenser um for each tier um but it does seem like there was some sort of tier currently the tokens trading at around 1.8 billion FTV and that's in comparison to blast that 1.5 roughly uh sorry blur at 1.5 roughly billion FTV um you can form your own

conclusion as to what do you think like the salana nft marketplace should be worth more than the ethereum sort of like gold standard nft Marketplace um but just one point interesting point of comparison is unisoft and Jupiter unisoft currently trades at a 11.6 billion FTV and Jupiter trades at a 14.3 billion FTB so make of the head what you will um something else on the air drop side of things deep book which is a central order book protocol onu introduced their native token deep through a soulbound nft the token isn't live yet but so far it looks pretty good and I think that protocol actually does like a lot of like volume in the grand scheme of things sure like a lot of

protocols on S do have a lot of incentives just from the S Foundation I think like just every week like all of these protocols get like half a million dollar or something ridiculous but still um it'll be interesting to see what it is like the first big air drop on WE given that I don't think there's been like a large one so far any thoughts on those like two air drops yeah I mean it's always hard to do air drop but especially following like the jto thing where a lot of people suddenly got a lot of money compared to like how much they have put in so I guess it always becomes like a tradeoff between do you want to incentivize kind of everybody or those who have really

really used the project and if you go with the lad option you're always going to run into the problem of like airdrop farmers who are going to get a big chunk of the like incentive structure so my like kind of small thesis I've been thinking about this that this is something that we will probably or like incentive structures or airdrop structures overall are probably something that we're going to be seeing a lot of developments in or at least like um projects trying out some new stuff here and there going forward yeah the tzer one's tough for me to digest just obviously it came like a couple hours ago so I haven't had a ton

of time to think about it but nfts have kind of been down only and from what I'm hearing like people were farming you know season one it was like the end of 2022 I believe so like if you were farming this thing at the end of 2022 you probably got absolutely slaughtered on the nfts that you purchased for starters and then they didn't even heavily wait the season one and season 2 activity versus season 3 so the people who came in post goto airdrop and then you compare that to the fdv of blur which is obviously the defao nft marketplace on ethereum and it's trading at a premium to it it's just makes it a tough sell for me um and on top of that like the prolif proliferation of meme coins like it feels like it's just totally replace the the attention

economy on its salana from jpegs to meme coins um and I don't know if I see that changing to be honest and you even look at Magic Eden's market share on salana I haven't looked at it recently but you would think that tenzer would have commanded like a 95% plus market share over salana volume considering it was pre-t toen and granted magic Eden is pre-t toen as well but you still see them with like 30 to 40% market share a lot of the time last time I had checked so I don't know uh I don't know if I would be buying tzer is I guess what I'm saying but obviously not Financial advice yeah but I mean I think that's a good example of or showcase as well how strong Originals have been recently like

a lot of people want to trade those and then I'm guessing that okay I traded ordinals on this platform let me as well just like trade my salana NFD here's like there's a lot of stickiness there and uh as I think I mentioned earlier on or on an earlier podcast that it was a brilliant like business move from Magic Eden to like push into this narrative and grow through that yeah that that statistic that you mentioned s is little shocking to me to be honest I would have thought like tza would be like com be like above 80% market share on salana all the time but yeah as viick mentioned I do think that could be strongly attributed to sort of

like magic Eden's command over like the ordinal Marketplace and in that set of nftd trailers flowing onto like other ecosystems yeah you also just to mention real quick before we move on to the next note here like you you can download their wallet and that get you like extra points for magic Eden so like I think that it like break you nailed it on the head like people download the wallet they use it and like they're like well I might as well trade Salon nfts here because I'm getting you know magic Eden points as well on top of my ordinals wallet it also feels that the like 10er Hive kind of died down or I remember it had to be beginning of the year when Twitter was full of people like coming up with different strategies and just like trying trying to get as many points

as possible and then lately it has more been like nobody really talks about that platform anymore all right a few last news updates Ellipsis Labs founder of Phoenix trade which is a crankers decentralized limit order Book Exchange on salana Race 20 million last week um and the last news update is that Antonio from dydx say that dydx before will introduce permission to Smart contract support which will enable more powerful opportunities for amm vaults structure products asset issuance and a lot more to be built on top of dydx any thoughts there yeah I think the permissionless contract support on dydx is particularly

interesting um the way I see it likely they want to enable you know a traditional Dex for swapping and a lending market and then you could see a world where someone could build something very similar to Athena fully on chain on dydx chain uh meaning you know a delta neutral stable coin or something of that nature so basically give uh Traders all the infrastructure necessary to do delta neutral basis trading on dydx chain so I think that that's really really cool and I'll definitely be keeping an eye there to see if any projects actually go and build uh kind of what I have envisioned then there was also that interesting dyx proposal that just passed to I believe it was stake a portion of the treasury I forget the exact amount to dydx

validators who were uh underrepresented so to like smaller dydx validators to help insury centralization of the network and uh its robustness so I thought that was a really cool proposal as well so not only you know increasing decentralization to dydx but also uh you know getting some yield in usdc to the dydx treasury it's actually in uh that was a proposal by stride so it's 20 million from the community Treasury and they autoc compound the usdc rewards back into dydx so it's actually like a a che little value acrel opportunity that they capitalized on for for the dydx token which I thought was pretty cool but yeah going back to the permissionless deployments it that's a pretty interesting business move because

if you look at something like osmosis they also allow uploading smart contracts on their chain but it's permission so like the community has to vote on it uh which I kind of think makes sense because then that doesn't allow for any body to like spam the chain with some like basically trash smart contracts or whatever um but I do say the like value in being permissionless or um like the crypto ethers and it's also like hard business model to get right because for the underlying chain itself it's like quite tempting I guess uh to start scaling

vertically into the same like business as the smart contracts or the new projects deployed on top of the chain are so like for example um on osmosis there are already like per platforms but I think there would be a big incentive for osis to like uh integrate perp trading into the chain itself because it's uh or like the protocol uh or the project would allow per per trading itself because it's a like Great Value acral um like possibility but then again like you're basically disincentivizing anybody else to start building on the Chain I feel like dydx has always had this Vision though of just pers trading like dydx is

one of those teams that I have to commend on they've had this Vision their entire time like we want to be a uh order book centralized exchange user experience on chain so we want to compete with binance on chain just for perss so I actually think that you know even if they see some decks or lending platform or something do a ton of volume and have a great value crew model they'll actually just stick with their Vision like they've never strayed from it thus far and I don't think they'll start doing that today I think there's some really interesting things you could do too with like cross margin um like obviously you know dydx is a cross margin exchange so like exchange so like it'd be kind of cool if you could use your purpose position as collateral on an amm or or a structured product or vault or some sort

of thing like that I I don't know if that would get a little bit too messy and potentially introduce new risk into the system but it'd be cool to see some of that come to fruition big Infinity po throwback RP all right um now for a quick word from Axel thanks to our fantastic sponsor dydx all right guys for today's dydx segment we have your host axar co-founder and director of the axar foundation thank you so much for coming on thanks so much for having me just for quick starters do you mind just giving us like a quick 30 to 60c overview of what Axel is absolutely so um Axel the way we like people to think about it is

that it solves the bridging problem but is not actually a bridge right all of you are familiar with you know Bridges and all of the hacks over the past few years Axel operates one layer below it is infrastructure it is a platform that allows Bridges and other applications uh to build on top right so to make an analogy the same way that on layer one you can build decentralized exchanges money markets nft marketplaces all those great Primitives with Axel you can build chain agnostic versions of those applications right the cross chain Dex cross chain Money Market Cross chain nftd marketplace right so it's a platform that powers Bridges but all kinds of other applications as well so we had squid rer on actually a week or

two ago how are you guys related to them and the The Wider dydx ecosystem great question so squid uh is one of these core Primitives building on top of Axel right and is the most popular cross-chain decentralized exchange that's built on Axel what it enables users to do is take an asset say uh BNB on this binance smart chain and swap into usdc on dydx as simple as that right a simple interface looks very similar to Unis swap but takes an asset as input on one chain and gives you an asset on another chain now for the particular use case of dydx all of the collateral is in usdc so that's the

asset it delivers to the user and uh the other cool feature that it has is that it can do the whole flow in uh 20 seconds we have what we call this Express features with Axel which allows applications to express their transactions and uh we have these uh relayer services that take the whole risk on behalf of the user so the user can actually uh get very seamless user experience get their assets very fast on the destination chain while assuming zero risk you have this kind of uh Market making entities that's one way to think of them that support the user and take a very small fee in exchange for the service gotcha I appreciate that

explanation and I know axar has a lot of exciting plans over the coming year so would love to hear what's on the Axel road map for the next six to 12 months um sounds great sounds great so we're on boarding uh many of the non evm chains right now AEL has just evm and Cosmos chains about 60 chains integrated to the network but we have a big upgrade that's going to launch Smart contracts on top of Axel and make connections permissionless so we're going to be adding Solana suie stellar reple and a couple of other non EVMS in the coming months uh now usually when uh we decide that we want to add a chain the decisions is informed by the customers right the applications uh building on

top of Axel and a big segment that we're focusing on is real world asset tokenization a lot of the real world assets ISU want to be launching on Solana uh because Solana has clearance from some regulatory bodies in New York there's only Solana and and ethereum they also want to be launching onui because that's a new ecosystem there's a lot of excitement there a lot of opportunity for new stable coin issuers um so I guess given how close we are with a lot of this real world asset companies we are prior prioritizing some of the nonm chains that they want and we have a lot of very interesting initiatives we're going to be announcing in the coming weeks and months on the real world doet side and also the work we're doing with financial institutions that's going to be a big part of what's

to come with Axel nice well that is super exciting and we'll actually have to get you on for a full episode at some point to get to get a bigger rundown of axar because I know there's a lot of nuances but thank you so much for coming on uh I don't know if you want to share with people where they can learn more about axar or uh where they can find you personally yeah for me I mean just follow me on Twitter feel free to message me I always respond to people uh just type my name on uh on Twitter and uh yeah happy to send you more information about Axel but I think just follow us on Twitter WE Post regular update so you'll be able to find all of the information there awesome thank you so much we'll catch you sometime in the

future absolutely thank you so much for having me now moving on to our hot seat Kone segment I'm going to throw it over to you Sam this week for probably one of the more talked about topics in the past week yeah I got a lar as a salana expert here for a second but uh basically anyone who has used Solano over the past week or two has definitely realized it is incredibly broken it's hard to land any transaction without submitting a request like three four five times and nil on Twitter we can be sure to link to this thread in the show notes but put together a great explainer of of really what's going on here so I'm going to do my best uh to summarize it for you so basically there's three passs for uh a given transaction on Sal either one it's successfully included and there's zero

errors so the transaction went through and it was executed successfully that's like the Happy case but then there's two where the execution actually failed so the gas is paid but the execution failed because of some certain unmet uh conditions so like for example if you have too low of slippage set on an illiquid Dex pair there's a chance that that transaction actually reverts because the slippage tolerance was set too low and that's actually the the chart that's been floating around on Twitter that shows like 75% of salana transactions have failed that's like that's the reason it's mostly Arbitrage Bots who are spamming the network to some degree in order to uh get their ARB through because transaction fees are so cheap that you stand to make more on the actual Arbitrage assuming it's

successful and you can you can afford those failed transactions so that's not really the problem here the problem is actually the third case which is drop transactions and this is the case in which the block leader actually never even saw the transaction request by the user so the N the networking layer is basically the communication layer of the internet and it's used to send packets from one data connection to another so for example TCP um and then there's quick which was actually designed by Google which I found interesting in this thread but basically salana uses quick and it gives the abil the builders the ability to drop transactions based on certain criteria in order to combat chain halts during periods of high demand and if you'll recall salana doesn't have a mem pool so losing

connection here means that the transaction never actually makes it to the leader so the problem is that even though block leaders can now like throttle certain uh connections the logic on which the connections are throttled like the criteria that need to be met are really like poorly implemented and buggy so the it's just not well defined and it's a poor implementation of quick so that's essentially what all the salon developers are kind of all Hands-On deck trying to solve right now but for the immediate term it's not clear if any sort of patch or fix will actually solve the problem in totality um fired dancers of course being worked on which is supposed to address some of these quick implementation problems but that's still six plus months out so it's really

unclear as to when these uh issues actually get resolved so I'll stop there I don't know if you guys have any good takes on the the porcelana performance but I guess it's a good problem to have is kind of my take it means you're you're doing something right yeah uh I studied distributed distributed systems engineering over the weekend and so I'm now like a PhD in network engineering uh what I I'm kidding I I'm not going to pretend to know that much about like the networking layer of salana but I think there's like two two ways you can like sort of fix this right one is like fixing the networking layer and there's like a bunch of like optimizations that a bunch of teams including like Anza which is kind of like a spun out like team from

the salana foundation or labs are working on like the client um they're working on like fixes to like the networking component but the other side of this equation is also like the fee market right traditionally niss salana has struggled with fee Market design their base fee is still like a fixed fee per signature and it doesn't take into account the number of compute units that a transaction utilizes and so there is like a quite a large incentive for these Arbitrage Bots to spam the network at a relatively low cost and so I think the eventual fix for this is both a combination of fixes to the networking layer and also fixes to the sort of fee mechanism and I know like a lot of

people are hyped about 1.18 and sort of like the new scheduler that's coming out but I don't think that's going to help this or like help what salana is experiencing that much because that's at the point where the transactions like actually reach the block leader um but right now like the transactions aren't even reaching the block because of these like Network and like propagation issues so yeah I don't know when it will get fixed but not going to lie salana like does feel pretty unusable I think most people have to like do transactions like three to four times and that's just like a pretty bad user experience so between that or like a $100 like transaction fees on the three just pick your poison I guess the only thing that I think is worth noting is that just three years

ago pre EIP 1559 ethereum had similar issues or at least a similar user experience similar negative user experience and instead of it taking like whatever a few seconds for your transaction to drop and not go through it was like tens of minutes or 10 minutes so you know while it's not good it's it's a bad user experience it's we've all anyone who's been on chain for you know five plus years this is something that will likely be solved in the future and get better uh and it's definitely not the worst we've dealt with so I guess what I'm trying to say is that having these problems now feels so much better than the problems we had you know just in 2020 which wasn't even that long ago what still isn't clear to me and I

hope one of you guys has some clarification here is how the ore mining actually plays into these problems cuz like from my understanding is it's not the Arbitrage Bots that are causing the problem it's it's other stuff and it's like is or mining really what ignited this or or was it is that not really that big of a part of the problem should we be uh maybe give some background on or mining Yeah Yeah so basically there's like a proof of work ripoff that's like an application on or a smart contract on salana and you can run this program to mine these ores and there's like very little liquidity there's only like 100k of liquidity actually that was like a week ago when I

looked it's probably like half that now but regardless you can mine these ores that have no real function um and apparently that's been contributing to salon's problems but I I truly don't understand why I mean this is all coming from Daniel our great teammate who tried to explain this to me one morning so I'm probably paraphrasing and paraphrasing in a wrong way but like he said that there's like a big incentive to just like spin out nodes or trying to get as much compute through to the chain as possible or through the smart contract uh which like emits these

ores when you solve the equation basically so what people are doing are they are for example hiring some like professional RPC providers I think um and then basically have them spam the smart contract on chain which then I don't know how big the effect really is on the like bad experience but apparently that could like bring about some problems I would have to imagine that these problems existed before or and I think like even before or right like there were periods where Solana was like slightly unusable I don't think or like contributed that much to what's you're seeing right now but it definitely like didn't help and as far as like the RPC

font brick I just thinking like on one hand M must be like crying at how unusable salana is but on the other hand this guy must be printing off his like RPC business I think it's just congestion in general so like I'm sure or mining has some contributes a bit but so does pump. fund so does memec coin trading so does everything else going on salana I think it's just back to like Ren's point that you know basically there's this incentive to spam the network to get your transaction in like if you have an opportunity to make you know 10 bucks I don't even know how many Salon transactions you can spam to make that still worthwhile but it's a ton um but yeah I'm definitely not the most well read on the situation either actually that's an interesting point um You' think it's like a

snowballing effect where suddenly it gets a bit worse and then more people start spamming the chain and then more people start spamming the chain so the like experience gets worse and worse kind of a self- fitting problem yeah the or problem would be more interesting if the price was going up because obviously that would contribute to that flywheel that you just that you just mentioned but I think Dan and mert honestly would do this conversation 10x more justice so we'll be sure to link to the uh the most recent light speed podcast which I know they talked about this in depth so we'll do that but outside of that Matt why don't I kick it over to you for your hot seeder cool Throne yeah so I don't even know who exactly to hold in the hot seat so I'm just going to hold this entire

situation in the hot seat uh it's the makered out a debacle you might have seen some of it on Twitter so for some contacts so for some context maker Dow put up a proposal to extend a credit line of 600 million to basically collateralize to collateralize die with SSD so this is taking $600 million that doesn't exist and die uh purchasing SSD and you know receiving the yield that Athena USD receives uh so yeah this is a big risk the protocol but at the end of the day uh it's a risk that pays off and that they think is a worthwhile risk directly after this maker out proposal a or Mark Zeller from a who leads a Chan put up a proposal to

delist d as a collateral asset on a so set the LTV to zero you can't use a you can't use uh D to take out loans on a anymore is the proposal that he put up and it started a huge controversy there are you know his Mark Zeller and backed by Stan kind of say that the reason for this was risk optimization they think that D's risk went extremely uh the you know the risk matrices on die changed completely in one day so they want to get rid of it completely others are saying that you know setting a 0% LTV is a drastic measure and that it's basically just severing the relationship between maker maker Dow and a which kind of makes sense given that they're starting to

compete a little more and more these days but overall the whole situation is just a giant show it's kind of setting a new equilibrium for governance across the board and uh yeah it's just probably not a good look for the space overall as it decreases kind of the defi Lego composability value proposition that we love and enjoy I think historically like meral has been I mean like it's always been like relatively back but they've dabbled in rwa a lot more and you know they've extended what call like private credit lines to various like credit managers so to say I don't think like Sude increases the risk of die being unbacked by that much to be honest and if anything like

Sude quote unquote going wrong would be like a slow unwind rather than just one day like a borrower from a credit fund saying like hey I can't beay like this $50 million loan um so in that sense like I I still think it's fine and from A's perspective obviously there are some sort of incentives that they have to a has has its own stable coin go which I don't think I've seen as much adoption as they would like so it would make sense for them to you know D this like a die Market or like try to quotequote like fud another like stable coin but yeah would agree that like it is a show and it brings up an interesting point right like there are these like new crypto D5 Primitives that people have thought of they've quickly found

like product Market fit and ground to like billions and billions of dollars of like TVO or like AUM or liquidity at the end of the day the whole thing about crypto is sort of like defi Legos right you get this vision of composability but then now you have the centralized or quote unquote centralized like Risk Managers coming in and kind of like cutting out the composability component of crypto and whether that should be allowed is a very good question and the follow-up question to that is like who should that sort of risk management lion you know should it be on atina and they should be the ones actively going like okay like make it out out like let's only do like $200 million dos of like die credit for like SD or USD or should that just be like purely on maker

Dow and then obviously there's like a whole bunch of second order effects to that with all of these protocols that are integrating like all of these different tokens in my opinion it should definitely be a maker though I think why this has gotten so much attention within the maker Community is because like historically maker hasn't really made this or a similar sized bet before especially on a mechanism that hasn't yet been proven in a like a Black Swan event and that's tough to model out because yeah you're basically just assuming like certain probabilities for the blacks one event and then based on that you get some EV calculation and then decide to do it or

not um so I I know some community members weren't too happy about like yeah this is a great opportunity for maker to print a lot of cash because uh basically the last time I checked uh I think maker was earning 80% AP wise for uh like the die borrowed out which is amazing if you have like 500 or a bill in there um so I do see the temptation to you know expand quickly and kind of take advantage of these high funding rates we have right now but then again on the other side like if

something will or if something happens to go wrong uh connected to Athena I feel that it's going to be like a super quick um unwinding or like an event that you basically you either lose everything or almost everything or then you survive so it's tough situation to um be in then yeah interesting decision to go ahead with such a large like I don't know decision yeah I mean I'm all for it I think while funding rates are positive like go for it and then you can change parameters down the line if you need to but I'm also like a usde bull I think democratizing that trade is is a really

cool idea and a new primitive that we haven't seen and I'm all for it but maybe that's just because Ren and I spoke with guy just this morning for an interview episode so recency bias no I mean I do see the vision I think it's a great projects it's just that as always with stable coins like the worst thing is when the market loses confidence in the protocol or the you know whatever stable coin you have because usually it's also quite irrational like what happened with usdc where the peg was trading below um like the confirmed collateral value that the bank still had uh beginning of last year I think um and a similar situation could go down with d

and you also have this game theoretical uh situation where like you're incentivized to front run all of your Capital out of the project to be the first one to like not take a haircut and then the people who are slower are gonna be the ones that are basically left holding the bags and maybe to clarify after having said all of the I'm I'm not saying anything of this is going to happen I'm just like like trying to paint a picture of what the maybe the worst situation that could happen would be here Athena's definitely got lots of risks like there's the risk that Ste

deegs there's the risk that uh you know copper clear Loop has 4our settlement so even if one of the exchange if one of the exchanges goes down like they'll have directional exposure for a 4H hour period of time binance doesn't actually use copper clear Loop so if binance goes down but at that point there's you know a lot more to worry about than just Athena um there's the risk that you know the whoever controls the ability to access the custody with copper clear Loop actually just takes the money out um you know there's no contractual obligations like that could happen a quote unquote rug I don't think that it's at all likely but it's a possibility so like there's all these risks to consider but you know I do actually think that at least from my perspective and in my opinion like those risks are outweighed by the current

reward that uh Athena is paying out at least for me and only for me not speaking for other people so maybe maker down made a similar decision and you know decided that $600 million was an appropriate risk to take on given that the expected value of their payoff from this position um so overall like I'm for it too I think it's a risk but it's a it's a well thought through risk yeah I thought it was interesting that guy told us today like he wouldn't be opposed to moving some of the short legs on the eth trade into Stables given the opportunity and like the risk management deems that at a certain time like I I just think that there's a lot more things they can do to protect against these risks than people are giving them credit for and I also think

like they're diversifying their you know their exchanges their custody providers like all of that different stuff so like worst case scenario in my view isn't like really the risk of negative funding it's it's actually like the risk of yeah centralized exchange going insolvent and not getting paid out on the short leg but even then like if you've only got 20% of your open interest on one Exchange then you're taking like what 20% of the you know 50% of the Hedge and then that's only that it just ends up being a very small amount so I don't think this is a scenario like us where all of a sudden you wake up one morning and your life savings is gone I think it's going to be at worst like 10 to 20% haircut but I'll probably eat those

words in a bare market so tread carefully no but as I said earlier like there's still the possibility that everybody starts panicking and then the situation becomes worse than it otherwise would um one question I had and I don't know if you want to save this for the other podcast episode but like did you talk at all about the insurance fund like what's the situation with that has it been growing and like through which ways Yeah it's gotten really big actually so they're adding about $6 million a week as of April 2nd it's up to 33 million from the starting point of two million I believe 10 million of that was added through the recent raise that they had but I think 20 to 25 million is organic just growth

and I believe that that Revenue I actually didn't ask this directly because it was one of my questions I wasn't sure where the acral actually came from but it sounded like ssde stakers get their Pro share dependent upon you know how much of the USD Supply is Stak and the remainder so the USD that's just sitting in EAS that isn't uh Stak in us sde that excess goes to the Insurance Fund so yes at you know 30 40 50 60% funding rates they are absolutely printing on that Insurance Fund I will note that the original studies done by I believe it was Gauntlet or chaos I can't recall which entity but they recommended $30 million of capital in the Insurance Fund for every1 billion dollar of usde

supply and obviously usde has about two billion of supply and only 33 million in the Insurance Fund so right now that actually is below the targeted threshold that was done by a third party but the internal testing that was done by the Athena team suggested more like 15 million for every 1 billion of USD supplies so it depends on which source you want to go on uh I think probably taking the more conservative of the two is the better approach but nonetheless like at this run rate like they're going to be at 60 million for their two billion USD in just a couple weeks and I mean at that point though it's a game of catch up because I'm sure the USD supplies on a fast track to five billion given that their sth campaign is kpi based and time duration based so it's either first to five billion USD Supply

or in six months whichever comes first and if it's anything like the first campaign then it will be a lot sooner than six months all right I think that's a good point to sort over to my hot seat K drone similar on sort of like the private credit side of things I have goldfinch in the hot seat so there was another default on gold finch last week this time from a company called Len East that they just reviewed that they can only repay 4.25 million out of their 10.15 million loan from the gold finch Pro so that represents roughly a 58% loss on that specific loan and it represents 7.7% of active loans on gold

finch according to sort of community members within the Discord 750,000 B from ginch was used by lendes to repay other borrowers obviously in Bach of the loan agreement you can't really do that that's a big no no um and yeah like a 10.15 million loan with a 25 month term paying out a 177% uh rate and yeah I think like this is probably the third default that goldf has experienced previously they had a default from tund day one from Stratos and a few like Alma vest po added together is probably around like 20 million or so so gold V is in pretty rough shape and all of these private credit protocols have just been continued to be battered like ever since

sort of like the Luna 3ac FTX Fallout and if you would remember there were like a huge amount of crypto market makers that blew up and weren't able to repay their private credit loans from protocols such as like Maple finance and it just seems like that Fallout continues though even outside of crypto borrowers um yeah I'm not sure what the solution here is obviously like underwriting jungle bonds especially in Emerging Markets is pretty hard and defaults are unavoidable like it'll be hard to run a private credit fund with like a 0% default rate but obviously you're hoping that the the return from your uh lending overcomes like whatever default that occurs and so I don't

think like maybe there's a bit of an adverse selection problem given that a lot of their loans were like an emerging countries in these sort of like sort of like growth mode companies that were doing like bike shirt or whatever so that definitely like doesn't help but it's also not like whoever was like underwriting these loans were not professionals you know they had like professional like credit fund managers like managing these loans during the underwriting but yeah at the end of the day there's always going to be like a lack of accountability like I underwrote those loans but like you know if something defaults like it's not really my problem and similar thing from like a you know like if I'm like a random like bike sharing company in Ethiopia and I default like yeah like

gold was probably like my last lifeline and like if I default then so it you know um so yeah that's just another thing on the gold V and like private credit side of things but would love to hear if anyone has any thoughts on how we fix this to be honest or like if private credit onchain should like even exist I think it makes a lot of sense to have private credit on chain uh just because of all of the efficiencies you can uh reach and all of that good stuff like I think we've talked about it quite a few times but to me it's just interesting like if you look at private credit funds just like in the Trad five world I'm I'm not sure but my if I recall correctly I think they produce around like 15 20% yields default rates

are probably below like 5% of the AUM uh which even at that point like somehow sounds super hard to me or high to me um and like compared to this Goldfinch situation which what did you say like 20% of the AUM is now under default that's brutal because like you kind of assume yeah you know that private credit and especially Emerging Markets are a tough business and like riskier than you know buying AAA bonds but still like you basically take on more volatility than um investing into equities and your returns aren't like even close on par

with that um so I'm guessing like if these news spread out more it's going to be hard for um like this some of these Deb protocols to you know attract Capital especially in a bull market like this when yeah we just talked about Thea but that feels like pretty close to a zero risk or I guess not zero risk but much closer to like a zero risk situation than um like investing into this super super risky or I guess not super super risky but still risky um like the instruments in Emerging Markets credit markets has always been the same

thing which is a assessing credit worthiness and B default recourse so when we like Maple Finance when it was going through its uh its whole thing back in the 3ac blowup days it had a ton of defaults I forget the exact percentage but it was even more than 20% of AUM um maybe closer to 50 their only loan recourse was reputational hit and in a world where you know three was blowing up uh reputational hit was not good recourse if I remember correctly and forgive me if I'm wrong I haven't looked into gold finch in over a year but uh they actually have contractual obligation and Loan recourse so I'm curious to see how that actually plays out um and who would go and Sue the defaulting borrower and additionally like yeah it's a you know this is a

ridiculously hard space to solve uh if we manage to get onchain credit to truly work whether it be through digital identities um you know I've always had this idea that it's some sort of like like ZK so basically your ident your identity and your maybe it's like connected to Plaid so your net worth and all your different assets are tied up into a ZK proof and then if you default it's you know kind of unraveled to the lender so that they can actually come after you and there's contractural obligations there so do you think one day we get these onchain credit markets to work and it will be what makes you know in my opinion the next step for defi like brings defi back into the narrative but the solutions we have today just are not there um and from a team like Goldfinch who seems to have

transitioned a lot of their bandwidth and brain kind of into other initiatives of late so they launch this like AI advisor or something um it it'll be interesting to see how the situation plays out but overall I'm I'm hopeful it's a good team I I wish them the best I just can't believe that interest rate you said 177% run so you're telling me I can buy usde and stake it and earn three times the amount as doing an under collateralized loan as a lender in an emerging market like that is you're on crack like under collateralized lending on chain is a great business for borrowers and borrowers only like you're insane to be lending on those things I'm I'm I'm sorry I think it's a terrible

idea until like that's on a private blockchain and like actual like people who have spent entire careers and under collateralized lending and credit assessment like that's when it makes sense and you can kyc and there's actual default recourse but otherwise like that's a no for me dog yeah not that you put it that way and make that comparison to it is pretty crazy I mean technically Goldfinch tells that all of its loans are like over collateralized and they say like they B do a bunch of due diligence like it's collateralized by like balance sheets like cash flows and whatever but yeah I mean like it's still kind of under collateralized at the end of the day and if you're gonna make three times that on Athena which is like quote unquote like real yield then that

seems like a lot better R would yeah I'll add that I don't know anything about Goldfinch for the most part and I do commend them for like trying it because it is needed like defi is fundamentally constrained until we have under collateralized lending but like today like yeah no you just put that so simply and eloquently like yeah H hard agree yeah I think uh one more thing that I just like to put on the C own this weekend has been making waves on CTS pump. fund so pump. fund is a website that allows you to launch a shitcoin on both salana and blast and basically how it works is that you deploy a coin you add like a ticker your image whatever and people can like buy

it on pump. fun and once it reaches 69,000 in market cap on salana it deploys $112,000 of liquidity into a radium pool up and basically as you can imagine like thousands and thousands of tokens are getting launched there every single day and every time a token hits the radium pool pump. fund takes a two so fixed m migration fee so at current prices that's probably like around $400 and pum fund is making $350,000 a day and if you sort of annualize that that's 100 million in annualized Revenue which is like pretty pretty crazy to be honest and like on the other side of the equation like de

screener they charge like $299 for an ad on like sort of like the right side where you see like the price the market cap and like that ad space is always filled up so I think obviously the main takeaway at least for me is that picks and shovels are absolutely eating especially like mcoin picks and shovels which makes me think that like telegram Bots will probably have to day again um this cycle given that they've been like pretty battered to be honest over the past few months but it's just crazy seeing like such a simple business make so much money uh and like it's something that's like super unique about kryp and these guys are like a three- person team yeah I mean that so wait you're saying for deck screener when somebody

links the socials to the coin they charge 300 bucks yeah so that's one component like when someone wants to link socials they charge 300 bucks and then there's also like ad space which they sell on the sidebar and that's probably like another like completely guessing you but probably like another few hundred bucks that has to be such a good business model because yeah yeah basically every coin you look at always has those socials there um and that's so scalable or like you basically don't have to do anything anymore you just like you've completed your uh platform and now you chill and enjoy the bull market yeah I think it's it maybe it doesn't make it uh sense for these platforms to launch a token themselves

but like shout out to the team for creating this stuff pump out fun has a real opportunity like in its current state it could definitely be like a you know temporary time in the spotlight but overall it's a simple idea right I'm not sure if I mentioned it but the lp gets locked so you know all you basically are buying into this um you're buying into this Cur liquidity curve with soul you're buying this mem coin uh and then eventually a large portion of the soul that gets put into the into the liquidity curve gets put into radium and then those that LP token is burned so it's no longer accessible uh so it helps with like these Fair launches it removes your risk of a in the traditional sense getting rugged where you take out all

the liquidity from the pool you can still get rugged other ways but the traditional uh rugging liquidity sense so it's like a great idea from my perspective the actual platform is um you know has a lot of room for improvement but that said like if it goes and launches across all these different chains right now it's only live on salant and blast but you could easily go see it live on Bas and arbitrum and everywhere else in the near future there's no reason it shouldn't be live there besides obviously instead of using radium it be using Unis swap or whatever um so I think that pump. fun actually has like the legs to be a a real like you said pick and shovel or infrastructure product in crypto and I definitely kind of hope to see it continue iterating and and growing and being better here's a question for you

all if you were one of the three co-founders of Pumped off fun you're making 100 million doll in annualized Revenue today so that's probably like $33 million each and chances are like this meme coin like craziness continues for at least like a few more months if not like until the end of the year or it gets even crazier from her would you launch a token or no you launch a token and I don't know like 80% of your Revenue has to like go back to like token holders just like some Fe switch you have to manage a dial like just push back uh now you have like Community only like part of the protocol where it's like if you don't launch a token sure you don't get like whatever money you can cash off the token but you're making like $33 million each and like just cold

hard cash if I were them I would be doing absolutely everything I can to further decentralize the actual product because you are literally enabling the launching of of you know shitcoins like yeah I would want to distance myself from that personally and I wouldn't want to just be pocketing Revenue into perpetuity but that's just my take Sam wanted to say a two-word phrase that can't be said on this show so bad oh my gosh uh yeah there's a lot of liability with launching tokens but I think more so you know if I go launch a pump. fun competitor to day and I shove a points like just a point system on the top right corner so that if you launch a coin you get 10 points or you launch a

coin that successfully hits radium you get 10 points you buy into a coin with more than one Soul you get one point like they will get vampire attacked and eight so I do think that actually to stay competitive they probably need to have some sort of token or incentive mechanism for users at some point okay another uh interesting question would be does anybody know if there's really like being a token that's been launched on buum that fun and then it's become like huge I think anam's cat H or whatever was like a PP fun launch and then there is like treat I saw I don't know if it's true or not but like some guy launched like 183 different tokens and he's made like 650k so far so yeah I do think there's like been a few like big ones like not like whff level big but like

relatively big tokens that have been launched on pump off fun I'm taking a look right now it looks like shark cat is the uh most popular at um um hm not sure the exact not sure the exact market cap but maybe 140 million or so followed by anom cat Hobs at 50 million followed by what in tarnation wit at 22 million so short answer no but like those are substantial numbers all right well I think that's a good place to stop it I know we all have an eclipse to go watch other than brick who is fading the the coolness of the the Eclipse which is insanity to me but you guys can get after him on that in the comments if you disagree as well but thank you guys so much for coming on we

will see you here next week and uh yeah thank you [Music] byebye