The Disrupt Weekend

In recent months, liquidity mining has come under fire for being an imprecise incentivization tool often attracting mercenary farmers.

As a result, a range of novel new services such as bonds, time-weighted voting systems and DAO-to-DAO-focused stablecoin issuers have emerged to replace it – a broad range of advancements with the potential to permanently alter how DeFi protocols attract fresh deposits.

Depending on the project, the mechanics at play might be referred to as “liquidity as a service,” “protocol controlled value” or even “DeFi 2.0,” but in all instances, the basic principle is the same: to manage and direct vast sums of capital via incentive mechanisms.

Liquidity is one of the two most important resources in this new world, and whoever controls liquidity controls DeFi.

On the heels of the emerging bribe economy, a number of new products are coming to market that serve as governance or voting middleware in an evolving tech stack devoted to helping protocols route and control liquidity: Warden, Bribe, Llama Airforce, Votium and Votemak. Tokemak is aiming to become a decentralized market maker. Other projects – such as Frax and Yearn – have introduced venomic models as well.

It’s definitely an order of magnitude increase in terms of capital efficiency and pricing as far as liquidity mining schemes, which can cause excessive sell pressure on native governance tokens.

While some protocols are playing the bribe game in an effort to direct liquidity to favorable pools, others are vying to control the liquidity directly themselves – an emerging trend of “protocol-owned liquidity.”

Algorithmic stablecoin project Fei is working with Ondo Finance, a risk-tranching protocol focused on mitigating impermanent loss, to build a product that will allow protocols to pair native governance tokens from their treasuries with Fei’s stablecoin to directly create liquidity pools.

Instead of protocols blasting incentives at a pool to generate user deposits, this would allow protocols to create the pools directly – and, critically, also keep a portion of the trading fees from the pool, creating a new revenue stream. This logic also applies to Olympus Pro, Olympus’ bond program.

This is part of an emerging sector of “direct-to-DAO” services where third parties help DAOs more efficiently bootstrap liquidity for their tokens, among other needs.

See Also: What’s a SubDAO?


Great charts. Recommended read.

“In our view, the most important developments this year in Ethereum were:

  1. Layer 2 arrives – after years of development, L2 protocols launch on mainnet and expand Ethereum’s capacity
  2. Creator economy goes mainstream – NFTs are everywhere and artists use Ethereum to earn billions
  3. Core protocol upgrades – the Ethereum R&D community ships multiple upgrades, preparing for the transition to Proof of Stake
  4. DAOs pass the tipping point – DAOs become a viable tool for communities to self-govern, accumulating billions of assets and drawing in new users.”

El Salvador adopted bitcoin as legal tender in September. Five months later, the perception of the country’s sovereign credit is four times worse than it was.

Credit default swaps measure the cost of insuring against a country defaulting on borrowing repayments any time in a specified period. As of Wednesday, the nation’s CDS was second highest in Latin America, behind Argentina.

Salvador’s CDS is telling you a default is expected at some point.

While several traditional market observers were quick to call out El Salvador’s supposedly utopian decision to adopt bitcoin as legal tender and invest in the top cryptocurrency as the reason for the spike in the country’s CDS, the U.S. Federal Reserve’s hawkish turn also appears to have played a role.

  1. The jump probably reflected concern that the country’s negotiations with the IMF for a $1 billion loan program would flounder.
  2. The country’s credit outlook is now exposed to bitcoin’s price gyrations because the nation holds more than 1,300 BTC and plans to issue a $1 billion, 10-year bitcoin bond this year.
  3. The debt burdens of El Salvador and other emerging nations with dollar-denominated bonds become more expensive as the Fed tightens. Thus, CDS offering insurance against potential default become costly.”

See Also: Why Brazil Is the Big Latin American Bet for Global Crypto Exchanges


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