Why We're Bullish TracerDAO | FULL DISCLOSURE

Transcript

[Music] hey guys it's david and ryan here david this is a new episode type we're going to do and it's not really a showtime yeah not an episode show yeah it's a show it's not related to bankless at all this is an occasional show we're calling full disclosure and uh we're only releasing this on youtube it's for projects that we love that we are advisors on uh we're firewalling this from all of the regular bankless content because this is this is more biased david yes this is full disclosure we have bags in the project we're about to talk about uh advisors or just things that we're bullish on the things that we have biases towards that we want to elaborate on uh because we're excited

about them uh and like the title suggests full disclosure that's kind of the whole vibe yeah i mean we're bullish we think they're gonna win we're advisors for this project if you think interested in their success we're interested in their success uh if you think that that utterly biases us and makes the opinions you're about to hear worthless then uh stop stop listening you know just full disclosure uh we're excited about this project and the first one we're gonna talk about is uh tracer oh by the way i should let folks know we have a list of all of the bankless disclosures actually we'll include a link to the show notes so if you want to see where we're advisors projects we're working on that sort of thing this is updated on a monthly basis things that we have more than five percent of our uh

aggregate portfolio in as well uh eth full disclosure i'm in equal to david i'm just shocked let's talk about tracer so tracer is this really cool project that we've been involved in over the last six months and it's really cool to see this getting built out what's the tl dr of tracer david yeah tracer is uh my mental model for is stability products the world is very chaotic and we can actually using finance help the world become less chaotic using stability tools and this isn't new to d5 this isn't new to the world of finance we've had stability and risk tools as far as finance goes back finance is basically one gigantic management of risk management right uh

and tracer is tackling that task head-on uh using um specific types of contracts that help people manage risk across defy uh and so we'll go into what that means um but there are a number of different aspects about tracer first off what its products are are super cool how it got started is interesting and compelling and just really the ability of the team to execute is also uh there are many different things that really get us excited about tracer and they've kind of checked the box on every single one um so that we have some mental models about um how to compare tracer to pre-existing patterns i don't know if we're ready to go into that already a lot i i want to do my my attempt at the tldr of this project because it's new and emerging and then maybe we should talk about

after that just how we got introduced the project how it got on our radar um but my mental model for this is like so yes uh stability uh even more concretely this is like all about derivatives so tracer to me is the unit swap of derivatives and the other thing i like about it is it's deployed on layer two so derivatives markets never really worked on layer one like dydx they they shifted to layer two and so this is all on layer two uh and the idea of like derivatives is you take an oracle and you take a collateral and you can create anything any a synthetic of anything a long or short any asset uh and that's what they're doing so for my mental model the reason i'm bullish is like how big did dydx get

pretty damn big and i actually think and i think you do as well that tracer could be bigger than that because it's like dydx is d5's answer to bitmex but i feel like tracy tracer is defy's answer to uniswap from a derivative's perspective this is like the unit swap for derivatives so uh if that teases your interest then uh then continue listening i mean everyone knows that dydx is like the absolute leader in uh perpetuals and and derivative products on their own specific layer two and they're not tracer isn't like a direct competitor with dydx uh it's uh in my mind like an evolution uh and where dydx is uh uh it's kind of siloed inside of its own layer two tracer is on arbitrum which is composable with the rest of

defy and it has a little bit more um uh just openness and permissionlessness than uh dydx does d5 dydx is meeting people where they're used to it's order book right order order book centralized order book uh feels like a centralized exchange with uh layer two assurances which we love uh but but tracer is more defined native deep composable and defy integratable and that's kind of where this uh you know open and permissionlessness ethos of crypto really gets baked into into tracer before we go further down that rabbit hole though which we definitely will uh we should uh talk about how we actually came to meet the the tracer dow team uh right how did we meet the traceroute team yeah so um one of the one of the founders of tracer uh reached out to us

aj uh is his name and he just basically said hey guys uh aligned with the bank bankless ethos we're building something cool you guys should come take a look and what's cool is because like we get you know people saying these sorts of things all of the time what was cool for me david is like they actually had a project like a product it was on arbitram on the arbitrary test net and i could go test it out and so we went we tested it out um it was incredible you could actually do things like most people that show up in our dm saying hey you want to help us grow this project like they have like a website and a white paper yeah yeah like no we're not ready for that we don't this was a fully formed product that we could actually try and so and then they

released very early on arbitrary mainnet like september or something they were one of the first projects in arbitrary net and wanted to try layer 2 as well and so uh i went long eath 3x long eath you know some of their products and tried it out and it worked uh so it's really cool the trade didn't work the trade did not work okay at that point in time in september but um the product worked it was really cool to see it was permissionless and then we got to know their team uh over time and saw the road map of what they're building that this is just v1 and they have tons of things in v2 and wanted to plug right into that i think you've got a story here too about tracer because they started as a dow first organization which is also unique right a lot of a

lot of d5 projects they don't start dow first they start kind of very centralized there's no decentralized governance and then they later try to convert across the chasm to dao not with tracer they started like doubt native and i think you had them on a meet the nation episode fairly early too right yeah and this is actually why i love the meet the nation's episode is because it's me simultaneously making content while also doing my own due diligence and so i had on pat from the tracer team on to talk about the genesis of tracer what tracer is the genesis of tracer so that's actually a great video to to learn more about tracer we'll have that linked in the show notes um the genesis of tracer is really really cool where they knew they they had a vision they had goals uh

and and those goals were to help the world help the the risk of the world be managed and so they were actually i think really not trying to make this a crypto thing they just saw crypto as like oh this is going to make our lives easier if we do it this way uh and so they they had a goal of making derivative products available uh to all to everyone and they're using crypto to get that done and they they realized that there are certain limitations and certain challenges of starting centralized and going decentralized and so they decided to go just the full dow route from day one and they did this very clever thing where they really just opened up the ability to become like initiating dao member uh and they didn't start the dow until they

had enough people on board with that of which they did not know so it's basically like a word of mouth link sharing phenomenon of like hey there's this tracer derivatives project uh the team is extremely experienced but not many people in the crypto know them click this link to learn more and then also you can become like a genesis member of the tracer dao by participating in this early round uh and so that link just got shared organically through some nooks and crannies of the internet of the people that discuss and care about these things and the the link got out it was purposely out of the hands of the tracer organization so it kind of took on a life of its own and i guess enough people uh accepted the call to join the dao that the dao got spun up in a distributed uh unknown uh entity um

unknown participation type fashion where like they actually the the the some of the originating members don't actually know who the other members are which is really important for decentralization like if you don't know who are the other members of your org like that that it kind of is a very strong test of decentralization granted now that that entire organization is now inside of one discord coordinating with each other but the genesis of this whole thing i thought was a very interesting experiment that i haven't seen run before and i hope it actually acts as a model to how to start a dow by organically finding people that are actually interested in your dow for the right reasons rather than just being like oh i'll get in early on this thing and then sell the tokens later uh no they did a very good job with

bootstrapping this thing so watch that meet the nation video to learn more let's uh let's pop the hood on this thing and talk about a little bit why we're bullish maybe i should just share share the screen of the user interface right now and the products that are in place so what we're looking at is the the perpetual pools product on tracer this is tracer v1 and so you can see here if you want to go uh 3x long or short on bitcoin it's just a simple mint away and then you hold that token the 3x long token or 3x short token in your wallet and it grants you exposure to that position right and that's the cool thing it's the leveraged position position is it instantiated inside of a token that's one of the cool new features of this one

particular stability product of which there are more exactly and the collateral here in this case is like usdc uh there can be other collateral types this is just a first almost like a a beta version or alpha version of all of the possible things but you could see you could you can get some you know 3x tokamak exposure you know chain link exposure exposure to the euro ave uh keep that keep that in mind so what you're doing is you're actually tokenizing these positions so when you were talking david about the composable nature of this right so think about how these how these different tokens can saturate all over the crypto space the other cool thing here is of course uh i think i'm signed in yeah this is this is signed in on arbitrum all right so this is layer

two this sort of thing would be cost prohibitive to anyone except a whale in uh on the ethereum main net but tracer's deployed it natively on uh layer two and i think they're gonna deploy to other layer twos down the road too so like number one with with v1 why i'm particularly bullish is this is a project that ships and they shipped on layer two and they're doing things the right way and they care um let's talk about why else we're bullish on kind of the long term because the perpetuals products that we see today are just the start i know tracer is is rolling out their v2 david but the high level if you pop the hood on this thing what's actually being built here maybe we should talk about

some of the factory uh contracts and like how this how this mechanism is set up and why it's permissionless yeah this is the the part of the conversation that i love because this is the one with metaphors so uh we have three other defy apps that i think are going to be useful to help understand to help people understand what tracer is and the first one comes to mind is uniswap so uniswap actually isn't any one particular thing uh uniswap every single uniswap market is its own contract address on ethereum like the ether usdc uniswap market is its own contract address so its own marketplace uh and then insert any unit swap marketplace here they all have their unique individual contract addresses for the uniswep

marketplace and at the spawn of this whole thing is the uniswap factory contract which you can go and engage with and interact with to spawn a new uniswap marketplace behind a new asset so if you generate a new asset you can go take that token address you just you just mentioned a new token you have that token address you take it to the unit swap factory contract you input that contract address into the unispot factory and you press the mint button and out comes a new uniswap marketplace for that one particular token and so this is how uniswap has really been able to answer to the long tail of crypto assets because you can get day one liquidity on any asset in a permissionless fashion instantaneously

and so that's why there are so many uniswap uh marketplaces out there and that's why uniswap is what it is this is the same thing that tracer is doing with uh d5 perpetuals uh and so kind of where like uh we were talking about how dydx is like a little bit of a siloed permissioned environment like you actually can't go to dydx and mint your own contract so if you have your own token like dydx actually doesn't help you with perpetuals or stability services you can't just spin up your own market the way you can on uniswap right exactly and so uh with tracer's uh factory contracts any token that exists can generate derivative uh marketplaces on its behalf right and so all you need is a token or even not even a token just

a price fee sometimes you don't even need tokens which is just an oracle right uh so like we can go into what that means um some things i don't think will ever become tokenized on ethereum such as like manhattan but we can still make a price feed for manhattan and start to trade that and so that's that's its own rabbit hole and so like that's the first mental model factory contracts allow for uh systems like tracer or like uniswap to since anyone can mint a factory contract uh we all have access to the same tools and these the the marketplace of ethereum of greater defy can always answer to the demand of the of its own industry right like if the industry demands stability tools it can go to

tracer and just make it uh and so that's why we compare it to unit swap that's why we say the unit swap of derivatives um what's the second yeah the other one that comes to mind is uh rari fuse pools uh i i've kind of already touched on this where like um compound finance has very specific assets that you can lend and very specific assets that you can borrow and you can't really change compound in the same way you can't really change dui dx but rari fuse pools can make is a superset of compound where because you can set the parameters of a rari fuse pool as infinitely as you like you can choose any assets to go in you can choose any assets to be borrowed against you can set your stability fees you can actually recreate a compound money market using a rory fuse pool by

just copying the compound parameters but you can also make any infinite number of other parameters as well using fuse pools so tracer dial is kind of like that it is actually limitless on the types of marketplaces that you can create because all it is is a system of factory contracts that accept inputs and if you think that the market is going to find your inputs useful you can go create that marketplace on tracer yeah and what's cool about this is it's just like rari in that um you know it's not dependent the the spinning up of these markets isn't dependent on governance like if you want to get a new sort of asset pair uh deployed in compound you need to go through the the governance process same

thing with with ave right and so it'll be like oh yes compound just approved you know this new asset can now be collateral you can lend and borrow against this new asset it's permissioned right it's a little bit governance is permissioned it's governance permission it's token vote permission rory says well no the market can figure this out right and so like i mean we can make any pool to any degree of risk and if you know capital can can choose whether it goes into that pool or not but anybody can create their pool doesn't have to be governance vote tracer does the exact same thing so any perpetual pool can be created it's not dictated by governance vote and so this gives us the ability to go address the long tail of assets anyone can spin up a market

anyplace like any point in time and provide liquidity for that market as well so that's pretty cool you had a is there a third comparison here yeah so so all right if there's no governance then like why do we why does tracer have a governance token what are we actually governing over so tracer's not actually governing over the individual marketplaces they it governs over the factory contracts that mints the the marketplaces right so it's like meta governance like what are we they it governs over the templates what are the right templates uh for tracer to allow people to use and so it's not governing over the individual marketplaces it's governing over the templates that create the individual marketplaces and so this kind of makes it a little bit more like

urine in my mind where people come to yearn and they submit strategies like here's my here's my yield maximization strategy i submit it to urine governance and then urine governance votes to include it in the urine protocol or not uh and that's kind of the same model for tracer daos like people will come with their templates to tracer dow it's like hey i think this is a really good template to spin it to and i think it will spawn ten hundred thousand fact uh individual marketplaces because this template is really really good uh tracer governance will vote on whether they think that template is good or not perhaps there just like urine there is some incentive for the template creator who gets some sort of uh kickback for uh some of the fees that are generated by

the templates and then the tracer governance can weigh and measure those pros and cons how much value goes to the dow how much value goes to the individual but the point is it allows innovation to again be uh exported out to the to the margins and allows innovation to happen at the margins and then tracer just votes as to whether to bring that into the fold or not uh and so these are the three kind of like defy app mental models that i've kind of used to understand tracer uh how how does that land with you how does that matter i i think it's great so we got we got some uniswap features right so it's like derivatives uh uniswap style we also have some rari type features anyone can spin up any market so we dress the long tail uh and the market gets to decide

rather than token vote and we've got some urine innovation where it's you know anyone can spin up one of these things and if tracer the governance protocol likes it they can embed these features into a factory protocol i think it's all of those things yeah um i you know one other thing i guess to touch on the um the addressable market size of derivatives is absolutely massive it at some level like it dwarfs what uniswap can do from a spot trading perspective right something like the total addressable market size of derivatives uh in like the world is in the quadrillions of dollars this is like the high hundreds of trillions of dollars into the quadrillions of dollars there's a lot of notional value that gets

created by derivatives i feel like d5 still hasn't found its killer app for derivatives permissionless derivatives dydx is doing sort of more more permission one marketed time derivatives but imagine the long tail of derivatives that we're going to create david when we get into the nft world when we get into the metaverse right so like one one uh product that tracer is going to be putting out relatively soon is a way to get long short punk exposure so what is the if you know the the price index of a crypto punk well it's the floor price and all you have to do is basically create an oracle for the floor price of punks put it into a tracer pool and then

bam you've got some ability without buying a punk to get long or short exposure to punks and fractionalized as well i don't have to you know spend 150 000 to get exposure to a punk i could just put a thousand dollars in go 3x long and have some nice exposure to that punk that's sitting right behind you super cool right and this could happen to all derivatives the entire metaverse we're going to need uh not permissioned markets here we're gonna need markets for like swords and you know video game items and collectibles and everything and you know the market's gonna want to spin this up so the total addressable market size of this is not just what we see in the traditional space where we've got the hundreds of trillions of dollars as d5

eats finance that'll happen slowly the real world the the big uh growth i think potential here is all of the new derivatives that are going to need to be created to stabilize risk and to give people hedging options in the metaverse and how big is that market i mean we're bullish the metaverse like we're bullish defy as a tool to help stabilize the metaverse i think the answer to that is uh pretty damn big and so we actually just uh recently put out um a dock that ryan and i were working on on the tracer blog uh and so we'll have that tracer that document that we're talking about linked in the show notes and one of the things that we're learning about we've learned about the team as we've engaged

with them more and more and more is they actually really really care about um using crypto defy tools to help uh the real world and they they are very interested in things like water markets or energy markets because like i kind of think the 2020s are going to be increasingly chaotic and so these stability tools can definitely apply themselves to the real world but something that a conversation that we've been trying to push the tracer team into as we've engaged with them is like the metaverse is actually going to come first uh because the metaverse is actually going to be easier to access than the real world is for tracer dao because everything will be crypto native inherently baked in on chain with no external dependencies

so like the narrative that we're kind of like cooking up is like well the metaverse is going to be extremely chaotic like it's already crazy just go look at crypto prices like that's going to be kind of like the underlying foundation of the metaverse and so the metaverse is just going to be this weird chaotic place and it's also going to start off really really small and so that's actually the perfect like testing ground for this these types of products tracer dao where like okay like it doesn't really matter if like crypto punks like the crypto punk token like breaks because it's just crypto punks it's like water markets it's not it's not gasoline markets it's not gonna hurt yeah no one's gonna lose their home because the crypto pun the the very early days of these whole like d5 derivatives things breaks down and so

like the meta the metaverse stabilizing the metaverse is like the proving ground for tracer dow like if you can stabilize the metaverse which is you know right now small market cap but extremely chaotic and slowly over time the metaverse market cap will get larger and larger and larger and then perhaps also become more and more stable because of things like tracer dow and the tracer dow will be able to use the metaverse as this proving ground to say hey we can take what the lessons we've learned in by stabilizing this increasingly chaotic place and start to apply it to the real world and that's again one of the the ethos about the team that i really really enjoy and i feel very aligned with is like they're here to make the world a better place um first they got to help out make this digital world exist and then we can

start to take some of the lessons we learned back to the real world and start to convince the the cryptoskeptics of the world that we actually have useful viable tools that can improve the real world dude i think i think this is um this is what defy is made to do basically right so i imagine you know how everyone looking at crypto right now sees volatility everyone outside they're just so volatile what if we could change that what if we could actually export stability from crypto back to the real world right that's that's what tracer is doing the other piece of this white line so much with the bankless ethos is perpetual markets right these these very convoluted things they used to be big and scary and difficult and only

reserved for like the elite right that would be like an investment banker or pro trader to you know construct these things let alone trade them right now we're democratizing access to the stability so stability and risk management isn't just a tool for the elite it's available for everyone um the other thing we should mention is some of the things that we've talked about here today aren't available at the time we're releasing this video but they're actually coming in uh version two which is like less than 30 days out i think version two is going to have tracer is going to happen this month and we'll include like yeah oops denver um what's going to be new in perpetual's v2

that's where the permissionless market deployment starts to come in that's where you have the ability to hold some of these tokens longer term without getting wrecked so like you can literally buy and hold an eth you know 3x and well i was wrong on that trade in september i'm betting i'm not going to be wrong two septembers from now david and so if i just hold that piece in v2 if i hold that token in v2 in that position i'm gonna be doing okay i'm pretty sure uh custom indices there's some minimums on the market now that are gonna be removed so um again a a project that ships and uh v2 they're shipping a lot um there's one other thread i want to touch on dave wait i want to touch on the

custom custom indices yeah so uh i'm uh longtime listeners of both podcasts that i've been engaged with bankless and pb crypto will know that i came from the world of tokenized real estate and that world has always been interested in like how can we generate like markets for areas right like how can i go long on los angeles and go short on seattle that's a losing trade by the way or how how can i like go along on uh two-bedroom homes and go short on studios well like custom indices with oracles is the solution to that right likes right we're not going to tokenize los angeles like it's not going to happen like it can't be done uh but what's way more

likely to happen is to just input price oracles uh and they also have this fantastic we don't have the time to go into it but like they have an integration with reputation dao to make more robust strong oracles uh and so we can like if you can produce a price feed on something you can produce like risk management or just like trading tools on it uh and so like the future of like going along the west coast and shorting the east coast which is a winning trade in my opinion what are you talking about dude you're getting ready to move to brooklyn just because my friends are there going long friends and going short enemies like maybe that's even possible but like literally like because it's just as simple as like taking in a price feed and plugging it into the factory contracts you can produce uh derivative

markets it's like that really just allows innovation to explode and i'm bullish on exploding innovation well yeah as am i this is a great thread we'll leave it in the show notes from a community member who sees the potential here sparkle crimes get uh all my investment advice from cryptocondom and sparkle cries uh anyway some summaries here putting my reputation on the line here tcr is the most crazy good project i've come across since tokamak at 21 million a market cap this is a few days ago so maybe not now and 132 million fully diluted valuation is criminally undervalued right now this thread goes through why exactly um throws in some real estate sort of use

cases like the potential for someone to bet 100 on real estate prices going up and down for a particular street city block or suburb actual financial participation it's really cool how about mitigating the financial risk of a potential job loss by taking a portion of the moving average of a person's income as a derivative tokens and tracking that really cool some earlier use cases let's say you have some tok uh tokamak as collateral and you want to bet on eth settled in tokamak you can do that right or any other token bet on one token settled in a different token exactly uh a lot of reasons to be bullish here we'll include that uh that link in the in the show notes as well um

my favorite my favorite use case is like say you're a metaverse uh grinder right and you are working in these play to earn games and you spend like years grinding grinding yeah maybe axi maybe you spend years grinding to find this super awesome powerful sword and that super awesome powerful sword allows you to grind even more efficiently and generate income for yourself but now all of a sudden you have like three years of your time locked up in this sword and if this sword goes down in value you like lose three years of your time well you could take a price feed for of that sword or swords of that category plug them into tracer and hedge your risk about that sword depreciating in value allowing you to get the capital income on that sword while being hedged against

the value of that sword going down like crazy stuff like that is like what's on the table uh look man i i think we've said all we need to say about tracer we're gonna be watching this project uh earnestly participating in this project uh as advisors we're very excited to see this project grow as well david what else you want to say before we uh we sign off here yeah we'll include include a link to the governance forums where ryan and my advisorship was considered and then eventually approved by the community just for full transparency and disclosures there if guys want to take a peek at that agreement you can also get involved in almost almost on-chain agreements yeah also get involved in the tracer dow discord that's a great way to like find out more about the project and plug into the community feels very early stage

very formative a lot of energy in there so yeah that's it guys this has been full disclosure full disclosure david and i are bullish on tracer the project help me