PANEL: Incentivising On-Chain Liquidity for Stablecoins

welcome everybody you'll see me more in my natural moderating element than as a speaker um really excited about this panel we've got some experts from a wide variety of different backgrounds related to stable coin liquidity from infrastructure to operators so I think we'll have a good conversation the structure we're going for here is a sort of a roughly two-part conversation at the beginning we'll talk about how smaller stable coins think about bootstrapping themselves and the different mechanisms and economics around that and the second part we'll talk about sort of efficiency and risk management at scale how things change and um maybe going a little bit deeper on the the data side of the world so the first thing is I'd like to ask everyone to just give a quick introduction we'll go down the line Y um hi everyone I'm alesandro I'm with dialectic uh we are an asset manager and liquidity provider across defi um so we have over 100 million in AUM and it's fully allocated to onchain liqu liity opportunities so we provide liquidity to eth and stable coin pairs across most defi protocols amm Landing markets on basically all evm chains so I'll be providing the point of view of the liquidity provider and maybe give some insights on the risk management side and how we think about allocating liquidity to different protocols and stable coins and so on hey I'm fig from Paladin uh we help project grow their liquidity on chain so we have projects that are stable providers like on my left uh basically streamly wordss to grow and deepen the liquidity thanks to lpce like the people on my right hi everyone I'm seril I'm core contributor to Aladin da and I'm representing today FX protocol which is the latest protocol by Aladin and FX basically enables two kind of assets the first kind is uh perfectly decentralized and unchain stable coin which has perfect pegged and in inherence yields coming from The the Reserve it's called The Reserve back stable coin and the second kind of asset is a leverage token which is non liquidable giving you up to 4.3x leverage on if without facing individual liquidation risk so that's basically FX protocol so I'm representing the stable con issuer here hi my name is Martin I'm contributor for curve to and I'm doing B things for curve and uh I'm like playing the part of the infrastructure provider basically because G is a big amm for staish as and uh yeah that's my role all right so the first question I'm going to ask our panelists has to do with bootstrapping liquidity for a new stable coin and there's a few things that go into that um the first thing I'd like to talk about is deciding which asset to pair it with on an amm or perhaps multiple um so feel free to jump in Freely but I'm going to going to start out on the curve side of the world with Martin uh because it's a good home for that yeah but what I think for project to do analyze numbers basically and try to make fact based figures I I guess most new stable coin think they're unique but most are not so there are comparable all stable coins which you can look at and see which how is it traded and then youve tried to yeah make a fact based decision Which pull you pair with basically and also a business bace that's playing into this two basically anyone else want to share thoughts on that one so um when you're going to release a new stable coin you need liquidity so you have to put strappy at some point there's multiple ways you can just use your own treasury basically own half of your own stable coins and pair it with another asset usually something like 95% of any liquidity is sp either with a stable coin most of the time usdc or if that's what we see some people have tried lately to pair with wbtc it's quite rare still um what most projects are going for is pairing stable to another stable coin the reason why that is is it's much cheaper and much less risky for people to op so it's a much lower risk profile than pairing with if because you might have impermanent loss you might have all of these plus depending on the resilien of of your stable coin in term of stability uh you're unlikely to keep the peg when if is going up or down if you're pairing so only the bravest per with if I don't advise you to do it yeah I think you made a a pretty good point what you want when you build a stable coin is for it to be stable so it's it's improving the P to to pair it with a a stable stable uh obviously with FX protocol we we don't really rely on external liquidity because our St are uh minable and redeemable orer price against the colateral at all times so it has inherent deep liquidity on the protocol but what you want once you release a stable coin is for it to be liquid so basically paired with very very liquid assets so I think the the First Choice could be for instance usdc if you're okay with centralized exposure and LPS but obviously there's also Alternatives which are decentralized and and very liquid yeah I can second uh what all of the the other panelists said uh from a liquidity provider perspective we mainly care about the impermanent loss so for us it's very difficult to LP into pools that are stable coin against eth for example because then we have e exposure and we have impermanent loss so for us the easiest is if we can LP into stable to stable pools um and then there's also the question about risk um so if you pair your stable coin with not stable coin that has some risk then the liquidity provider will need to assess the risk of both stable coins in the pool um so usually it's recommendable to pair it with usdc which is usually considered to be risk-free um and another point is about yield bearing stable coins so if you have a yield bearing stable coin it's usually good to pair it with another yield bearing stable coin because then the the liquidity in the pool acru the yield at a similar rate and then you also limit the imper loss and I I I think of something also probably important especially for CDP models they also need pretty deep liquidity with their their collateral which most of the time is e exposed but as you you say it like LPS are not uh I mean very comfortable with uh providing liquidity to a stable volatile pair which because it it it needs way more management or uh implies IL and that's also the interest of of stabon which is redeemable against if is that you can pair with that stable coin and build liquidity with if at the same time yeah and also in regards to concentrated liquidity pools if you have two assets that are not moving um at the same price so if the if the two stable coins vary then it's a lot more difficult for a liquidity provider to effectively provide liquidity and concentrated liquidity pools because it forces you to move the ranges along the way so um these are two very interesting points I want to come back maybe to give a bit more background I didn't mention it previously uh at Palin we basically operate a Marketplace that helps these projects uh Define these strategies and basically execute them and on the side I also contribute at the a liquidity committee where we have all of these uh topics on go specifically we had to reeg it now maintain it and scale it uh I think there's two really important stuff that was just say the first one is um on the topic that we haven't introduced yet which is the cost of liquidity in the sense that depending very strictly on the asset quality of the asset you're going to have different cost based to it so depending on how uh I want to say risky your stable coin is uh it's going to cost more than uh tier one stable CR has been here for a very long time so the longer and the older table coin is the cheaper is going to be to incentivized if there are no problems with it in a sense FX us is seven eight months old I want to say so every USD is something like one year old almost so the more time happens the more lend they have and the cheaper they are because LPS are basically less scared of it that's the first one the second one is what you mentioned with liquidity uh pairing with stable coins um the cost of liquidity can Wily vary uh once you start going from two asss that are similarly correlated like dollar pick stable coins right so you're not going to be able to find the same profile of users you're going to need people who are much well versed in term of risk management in crypto and who are much more let's call it Deion right so that's a very important notion that maybe we'll see later on but uh you have to be really careful about presenting your stable coin to the market and showing why it's not risky compared to the other the other topic I want to come back very quickly into is when you talk about concentrated liquidity and the fact that yield bearing assets could uh had to have the same rate of interests for example being acud uh I actually disagree with this because are now specialized amm and we're seeing more and more of this that can basically uh have the stable coin in Seal bearing State and when it's swapped it's basically redeemed or unstaked into its uh normal State and traded at that point uh what's interesting about this is that we seeing more and more of this happening at the aggregation level so curve does not need to be able to provide liquidity between SDI and sde because uh any aggregator one in or Power Swap are going to understand that uh they can unstake and swap directly on the base liquidity so what's interesting about this is that now we've had a layer above the amm that has been built that can basically automate all of this action for users yeah and especially with uh things like house swap where the solvers can just do all of that work for you a lot of that complexity gets abstracted away thank you guys you're making my job easy out here um I want us to return us to one of the things that was brought up the idea of external incentivized liquidity versus direct Redemption uh so there's a wide variety of approaches that different stable coins take to this the most emblematic is the example of Dy which initially had only external liquidity right people would me d sell it on a decentralized exchange or on a centralized exchange um they had problems with the p the price going above Peg during adverse market conditions and in introduced the very controversial Peg stability module so I'd like to get any thoughts related to that um you know your experience as a market maker with different types of stable coins um for stable coins that might have a hybrid approach how they allocate their resources things of that nature um feel free to jump in according to how the mood strikes you yeah I think I think the redeemability of a stable coin is is very important especially after the US PTSD like people I understand why people can uh struggle trusting decentralized table coins and having a stable coin that is always redeemable or or can always be minted at Oracle price such as the ones we we build is very important to strengthen uh trust into the the model because users know that all time they can they can basically swap back to the collateral at at the stable con price um and plus it also enables like building liquidity like I told before but I think the ecosystem and the decentralized uh stable coin ecosystem needs uh more trustable models uh stable that users know they will always be at one and and they won't have to to uh sell it at uh 98 for instance and so yeah I think the the redeemed redeemability model makes a lot of sense and we should see more and more of these designs yeah in a way you can see the peg is like the quality of the it shows the quality directly of the stable coin basically so uh that's like very visible and this like the the heart rate of heartbeat of St coin basically so comes down to this so I don't know if needs technical it needs Tech solution in the background but people don't need to understand them the pack just have to be stable at the end so yeah that's the well I think it's an interesting question and I don't have the answer in the sense that um you have stable coins that have a Redemption model liity was the one who really pioneered it and you have those that don't have for example like CRV USD but you don't necessar need one the redeemability was basically created for stable coins who could not handle stability without this inherent mechanism right um where it's really interesting is that it introduces a new risk uh for all the protocols that have introduced it uh which is essentially what can a bankr do in the sense that if people can redeem means they can exit and you can get your tvl drained really quickly and sometimes not by the actual uh collateral holders but by the people who are arbitraging so it creates a good feedback rout in the sense that you can help the peg thanks to Arbitrage but at the same time you're at risk that arbitres will drain your protocol so there's a few solutions to this uh I know some at some point FX had this problem and they introduce the dynamic rate I think everyone who had just a stable rate had this problem what it's interesting is that if you introduce an actual fee on the Redemption like almost all the protocols have what you're doing is that you're B basically implying that your stable coin is not trading at $1 but at $1 minus the fee so for example if you have a 1% fee I think that's what liquidity had at some point uh a liquidity sorry uh you're basically theoretically trading at how much I think it's five five so you're theoretically trading at 0.995 Dollar so that's kind of the Paradox if you're adding Redemption it's great it creates new risks but at the same time it implies your stable coin has like a small discount which is a Redemption fee yeah also maybe just make another distinction between stable coins that are redeemable by any users and stable coins that are redeemable only by the user who open the debt position um because in the second case if we as liquidity providers or in a concentrated liquidity range we may get out more stable coins than what we minted and then we ourselves are not able to redeem the full amount so then in order to make sure that we can get the underlying out at p we rely on Arbitrage we rely on people who have the open cdps to buy back the asset and close the CDP so from a risk perspective that is less attractive than if anyone can redeem it um but it's on the protocol side it it's comes with a lot of trade-offs of course do you view Redemption as a feature that adds uh I would say attractiveness to stable coin uh yeah generally generally yes yes anything that helps the stable coin to stay pegged um it's generally positive but this comes down to the P basically so it's independent with technology how you achieve this basically just that you see new generations like C you see is not Rel refresh they try without this and I think I'm not sure if this is the future but I guess it's like it's s it's a simpler way basically than having Redemption because then have you have all issues yeah and if you have enough liquidity and you have enough Arbitrage and the market is efficient enough then that's totally fine but especially for lower liquidity stable coins and new stable coins that is something that is a lot more important than what kind of uh it's because there's different types of redemption you mentioned before when you as the question there's Redemption against the backing which is what we have on FX USD or liquid and then you have Redemption against the stability module which is what maker has which is what go has and then you have as you mentioned external liquidity so um I'm not as well versed as you are maybe on the PSM because I know you have one in your protocol but uh my feeling is that um the cheapest one is having Redemption against your collateral then it's probably external liquidity and then the most expensive is having a PSM because you need to provide either your backing of as collateral or external resour directly into the model right yes Redemption against borrower positions like in liquidy is a little bit different from what I meant uh because that majorly changes the ux it's a little bit different from having like an idle capital reserve like maker has which is part of its overall liquidity strategy and cost of capital for the protocol but um this brings me to another closely related topic uh we we're touching upon the dynamic fees question and I'll tie that into a broader concept which is the shape of liquidity right um how concentrated should liquidity be for a stable coin um should it be opinionated in any way like the gyroscope um elps as far as Dynamic redemptions how do you know what the fee should be at any given point in time based on volume um let's talk about thoughts related to that I guess it depends on the stable coin model for instance a CDP model May face uh High higher selling pressure than for instance uh FX model which is always minable and redeemable orer price so there's no selling pressure on on our model but CDP model for instance they when the market is bullish they face pretty high selling pressure so they may need higher liquidity uh below below PC to face that uh selling pressure I guess it's just depends on the on the model and the overall liquidity yeah I I agree it depends on the St coin uh the launch strategy the utility of the stable coin the reason why that is is that uh and also the users who are the users because depending on the utility that your stable con has users are going to want to keep it or swap it to something else which creates additional pressure right and it's going to depend on which amm you release it I'm a very big preacher that you should release on multiple amm you should almost always have a curve ball because the way curve is designed it's going to enable a very resilient around the Peg and the strategy we usually recommend is using one main pool on curve as basically the basis for liquidity and then one concentrated liquidity depending on your use case with a different shape so you can do concentrated liquidity today on three amm mainly which are Unis swap Maverick or gyroscope and Bouncer and then a main pool on curve which enables you to really have the resilient liquidity the problem if you only do a concentrated liquidity pool is simply that uh people are going to heavily trade against it and at some point you can fall out of range on either side and you don't have any more liquidity so you don't have a stable coin and that's exactly under stress basically what this happened so this is why you need something like curve you can trade anytime and I would say in that case the curve pool needs to be with a very uh resilient and pegged uh stable coin because if if you can't rely on on that pool then you may face problem if the other pools are uh out of range and so on that's that's why releasing CRV USD made so much sense in my opinion when it was announced because uh the big question when you create the St coin is who am I pairing to on a curve and at some point we're going to start seeing all of these guys pair against crb USC because the network effects and the technology is going to be very synergetic with g at least that's what I expect yeah yeah I hope so yeah the thing is you know what we miss little bit is it's it's like it depends if if the S Co is a mean of exchange or if it's a like a asset where you store your value in basically and everyone wants to be a store of value at the end but most stable coin are just speculative assets right now so the first move you should try coming from a speculative asset in a in a um mean of exchange State that's like the the first a being a store value is very difficult basically I agree and uh almost all of the stable coins want to become the reserve for Dow so they go and see Dows and like hey you should use our stable coin as a reserve and they're like no we're not because I think that's a page I stole from fra uh what they call stable coin maximalism and they think that at some point everything is going to be a stable coin I think what we're starting to see and it's really starting to appear today with with Aladin through FX um every project that scales up from a certain point has an incentive in building their own stable coin simply because they can uh create more Network effects and add basically additional Revenue through the actual uh system they already have just by owning their own stable coin and owning the whole stack so what we're saying is they're probably going to be less more and more fragmented liquidity which is good for curve because this is more swap pH it's also good for me because there's more business but in general um what's important to understand is that uh there's still very little knowledge about liquidity management in general a lot of people just just create one tool and don't really think about all of the consequences of the design and um I do think there's a very big need of uh either externalizing or bringing someone in to actually thinking how to manage your liquidity because it is a full-time job and it's something on top of just designing your project your actual technology thank you that I think is a good time for us to start we've covered some of the thoughts around what a project that's just setting out and designing its liquidity strategy needs to consider the possibility of multiple amm the native Redemption mechanism and I think we can start talking now a bit about things that become more important at scale such as Gathering data on costs and so that's the first question I'll ask is um as a project is studying its liquidity campaigns over time how does it know when it's spending too much or too little and what are the considerations that go into an optimized strategy how often should emissions rates for a token be adjusted how should a project how much of the yield from lending should make or pay out to the die savings rate those types of things so let's start talking about the um maybe curve style onchain incentives first um and maybe can share some databased thoughts with us yeah there are many ways to incentive liquidity and curve basically so um yeah what's the question again sorry the the question is when a project is looking at the results of its initial liquidity what I see is that people like they need to analyze their Market basically that's the main thing you don't need like deep liquidity if people only trade like five T 5K uh so you have to look at your middle trade size basically and then you have have to say what it's like what it's the willingness to take some uh diverge from the pack on every trade and then you can Target this basically and not sure projects doing this and I think we miss also like on the tools it's not that many projects built on curve or other amm um like services or analytics tools but a lot of tools are still not there that you can easily see this for your own pair or your own um stable coins or for any stable coin else basically yeah technology for liquidity management is extremely primitive today and I'm saying as one of the people who's building it in the sense that uh it's I think a domain that specialty has been existing for maybe two three years at most so there's very few people today who are still knowledgeable about it uh when we a new stable comes in and talk to us if they already release their assets whatever it may be the first thing we do is exactly what you describe look at the average trade for the month remove the 5% uh slower transaction the 5% biggest ones so we have the the average of what's a normal trade and this enables you to understand how much liquidity uh a project needs to accommodate 90% of its users so probably for a stable coin it's not 90% that you should do it should be something like 99% um but in general uh what's complicated uh about all of these incentives and the the way the structure of all of this work is that uh some projects are going to come in with a budget in mind and some other projects are going to come in with a goal in mind the problem is uh these two are not always compatible depending on the resources you want to spend on it or depending on what you go so you have projects over spending and you have projects under spending there's kind of an equilibrium it's going to depend to what you do right yeah I mean it makes it makes total sense and I I guess the the metric you want to you want to follow is uh how much do you spend to to gather that amount of uh liquidity you you uh you need to to to to to at Peg and facilitate transactions so yeah I guess I guess that's it yeah i' also add uh Point around the fact that um like projects don't live in a vacuum and so for example the DSR is paying 8% for holding D so if you are incentivizing your new stable coin which has a lot more risks than D and the incentives or a 12% and that's not really attractive for liquidity providers and so as we have seen over the last couple of months the entire rates in defi went up all of the incentives went up all of the yields went up so as a liquidity provider what we care about this risk adjusted return and so if we can move our money to some other stable coins which has lower risk but pays the same incentives then the market is efficient and the liquidity will move to whatever is offering the best risk adjusted return so even as a project I think think um you need to be very mindful of what's happening outside of your ecosystem and just be sure that the rates that you are offering to LPS are competitive with the market rates and the market rates can change quite quickly if some new protocol comes out with a new big incentive program then it's going to trct a lot of liquidity and that liquidity will come from projects that don't have the same resources to to incentivize LPS um and then the other thing is is around the risk so it's it's important that you understand what risks the liquidity providers take when providing liquidity and you need to incentivize the liquidity according to the risk that that the LPS are taking and there's a lot of things that protocols can do to make the the liquidity more attractive to to the liquidity providers by reducing the risk so it's um I've been writing an article on what you just said and uh it's something that's taking a lot of space in my mind lately because uh there's a huge problem in crypto compared to traditional Finance I come from banking glob um and the thing is in trafi we're into an organized system that's ruled by Central Banking right and these central banks have what you call repo banking which is basically I would say the nominal the base rate for all the economy right in crypto we're into what we would call a chaotic system I think so there is no Supreme hierarchy with an entity at the top that doing the base rate right so what's happening is that you have a ton of rates none of them is the zero risk one or the riskless one so you have to think okay what's the base rate today and today it seems we're thinking it's probably maker because it's the biggest but what happens uh when a becomes as big in term of tvl as D what happened with CRV USD becomes as big as this the big question is what's the base rate for defi right now and honestly I have no clue yeah but it's it's you can compare it to this but it's a much faster system and this is the reason it changes much faster I think also if you talk about bootstraping liquidity for new really fresh sa coins the market timing is like very important because if you're coming now to the market you have to pay like insane rates basically and half a year two years ago was quite different of course then maybe you was hard to raise Capital but at some point U you yeah that's like the main thing if you think long term you also think think about your entry point in being a stable coin basically and it's depend you want to spend much on incentivizing the liquidity or you want to re build your Market early or this kind of thinking it's not just one time shot basically yeah but rates are not going down because it's partly due to competition right and the more stable coins they are the more they have to keep paying you think so no I think the rate is only there's one reason the rate is up one is like the US dollar has a high rate and the second is because we're in a bull but if the bull is out I think we will see the same as last we just try out and thank you for that the next question I have for you guys is what are your thoughts about longer term types of liquidity management you know the vast majority of liquidity incentives in defi are short-term oriented LPS can come and go at any time but there's been some interesting experiments around around locked liquidity and sometimes this is quite short you know for Athena SD it's a onewe Redemption period there's been a lot of popularity on Pendle you know two or three month fixed yield Assets in this cycle then we have things like fra Finance fra bonds um and U there have been some older protocol owned liquidity types of things from the last cycle which maybe can unearth those skeletons or not we'll see but um you know I'm curious both from the the capital provider perspective and the the protocol perspective as far as what do you see as the benefits and the downsides of maybe longer term liquidity locks and what durations might be the most attractive yeah maybe can sort on this one so a thing that we have been doing a lot recently is to work with the protocols directly and establish some long-term liquidity partnership instead of going through the public incentive programs which are very unpredictable on the payout side like we don't know what the rates are going to be but then also on the protocol side they have no guarantee that the liquidity that they're paying for now will be there in in two three weeks um so we have had a lot of traction on this we're working with a lot of the major Bridges and some amm and it's something that I see being more and more popular in the future because it just makes sense on both sides like the protocols need liquidity for long periods of time they want to be sure that the liquidity is there they want to have a say in where the liquidity sits and for us it's great that we know that we get some rates and we don't have to shift the capital back and forth and and to different protocols all the time um so there's no good protocol to do this in defi right now we have been seeing some some experimentation around that but I do think that the future is going to go more in that direction where you have a few big liquidity providers that are most of the liquidity for the protocols that needed and then whatever is not filled by that gets filled by retail of just people moving their Capital around yeah I agree with that but somehow I think it's a l the technology itself if you look at pulled assets it's very hard to to put the timing into this who is like able to track that basically so what we see you just say you lock one week and that's it and then you get a reward on that in points basically but do this on chain is is expensive because you have to compute basically so maybe we will see all things on Layer Two first in this direction which is like a def native solution for this which I would prefer because yeah you as an entity you profit from that that people want to have this but somehow I guess it should be like a yeah some kind of protocol you can just plug in if you want to use it isn't Jer to what you're saying ZK co-processing I I've been studying this I'm not sure where ver into it but I feel like it's going to happen but yeah maybe the what you just say kind of troubles me because I have the same conclusion I see that's Direction uh most of the liquidity providers are 5 10 20 50 people in the ecosystem and they're taking maybe 80% of the liquidity the problem is that if we go for privatization of incentives uh we're going to come back to a blackbox system like we have in PRI so I think the risk is basically having that Trend that keeps going where we have bonding system Locking System as you mentioned with fra uh which is very interesting kind of looks like more traditional bonds right but uh it's not adapted to the fact that most crypto users and most LPS are very mercenary and the risk opportunity in crypto is extremely high for locking longer than one week or one month so if you look for example at fra before the FX bounds if you want to benefit from the gauges so the incentives in fra you have to lock in your liquidity for up to two years I want to say and uh when you look at the way it's done it's the same for a few protocols you'll notice that the risk rates so basically the the cost of liquidity on these am is much higher than on any other place because if you're not liquid from Day Zero from second zero I want to say even then uh users are going to expect a much higher yield sometimes two three four times the premium so the question is do you want to pay much more but lock in the liquidity so have some kind of guarantee or do you want uh to have uh liquid so available from the get-go and pay the market rates but take into account that they can sell the rewards very quickly too there's this alternative which is what curve has done with the V toen iics in the sense that you force people to align themselves into an optimal system an optimal configuration in order to man maximally benefit from the system so there's a lot of different iterations of this but now what we're basically seeing it's it's basically algorithmic coordination between uh the LPS and the people who looking for liquidity and that's the whole challenge today I think today it's finding ways to communicate uh from Market driven governance into this but somehow we are just a like short-term oriented industry basically because if you make it longterm then you make it like a homeowner you try to refinance if it's cheap so that's if you're like an established protocol and you want to have liquidity then you try to make deals in a bear and then people will give you money cheap basically and then you just hope that yeah you get a better price for long term so that's for more established protocols this or St coins this maybe the play just to look think more long term and they pay anyway less or have to pay less I I think there's no binary answer to that because basically you can you can rely on sustainable liquidity and be a okay to pay a little more for sustainable liquidity uh especially if that's liquidity is profitable because it can be more expensive but still profitable if the protocol has a profitable design so and building that base layer of liquidity can also reinsure and create like some kind of of virtuous circle around the protocol and then you can rely on less um uh attract like maybe less um I don't find the world like like more short-term liquidity as well on top of that base layer of of long-term liquidity I think like both both strategies are are good basically I think what Martin was saying and you what you bounced on brings in an important topic is that most projects in crypto are startups right three or four years old startups were defi so they're very very young the average is something like 98% chances of dying in five years for a crypto project right so most of them are not thinking longterm they're just throwing incentives week by week and uh very few are thinking long term by creating systems that are going to be able to uh uphold over very long periods of time curb and FX are actually exceptions more than the norm today and that's what seeing like we've been live and doing this uh for past two years I think we have three clients who have been with us for the past two years and uh these longterm people the ones who have very long-term Vision are the one who are also the most likely to succeed because they already are showing 12ps that yes we have a plan for long term and that I think is something that's missing on curve is that we don't have today what we would call liquidity streaks in the sense that uh you don't know how reliably a pool has been streaming incentives yeah maybe soon I agree yeah you know now I'm managing liquidity for Lending markets and the the market somehow is also a bit naive I guess somehow because nobody asks you how long you want to pay this and how long does it work and so it's like that but it's like a pro market daycare I guess but normal people they don't care they just shift on numbers basically yeah we had to build a lot of software in house to keep track of what the incentives are what and also like there's a lot of protocols that show you a number on the UI and then when you actually do the math on how much you've been earning it's not that number um so the whole the whole Space is not very efficient in that like we need to do a lot of work to make sure that we are getting paid what the UI says that um like the risks are what the documentation says and and there just it's not a very efficient um environment as of right now and if you think about you know we we now we just we talk about the price of liquidity basically but who pays for this you know at the end and at the end either the investor pays or like the people who get the token dumped on pay or yeah who pays for the I think that's the other side you know that's what the reason why you fire up has they coin and then you make a token you incentivize with the token the token of course will just fell constantly down because people Farm it and then you're done this is the reason why I call them that then it's not a stable count anymore in the sense for it's not the stable Co the stable coin is then um a speculative asset it's not what money is it's not s value it's not the mean of exchange during the speculative asset period it is but afterwards just that it's gone and Di well the formula for uh the efficiency of a stable coin provider is very easy it's revenue from the protocol through stable coin streams Minus cost of liquidity it's it's basically just this right and if you're making less than the cost of liquidity then your project is not sustainable that's okay if you build STP you know no which one but question is where is the level where you say you never have a chance if you boot strap like this to achieve anything sustainable basically yeah yeah and maybe just one last point on the cost of liquidity is that for some opportunity especially on like lending Market you have like the incentives but you also have some organic yield which just comes from like the interest rate that the borrowers are paying or an amm CF the organic yield that comes from Trading fees and what we see right now is that like 90 to 95% of the yield comes from incentives um which kind of shows that lot of these Protocols are not actually sustainable if they stopped incentivizing like if they stopped incentivizing then just the natural yield that the protocol generates for the liquidity providers it's below the 8% that you can get on the DSR and that makes it unattractive um so that's also something where I think protocols need to be mindful of where like you need to provide some organic yield some yield that comes from something that's not incentive because you I mean maybe you can keep incentivizing forever but that doesn't seem super sustainable long term well the thing you have to be careful on is that there's a lot of value leakage in crypto right you have permanent loss you have loss versus rebalancing Etc so the problem with all of this is that if you don't incentivize on some of these systems then you're going to have value that's going to liak and your protocol can be able to Arbitrage or things like this able to get back the loss of value but they have to reinjected so in my mind and I'm biased of against this I think some models uh have to be incentivized but that's okay if it's fought as the problem is if you're relying on this for example a lot of projects are using incentives uh to create utility for the stable coin or to create demand uh that's the first problem you should have natural demand natural utility and then you're incentivized to hold the liquidity or to fill in some natural uh holds that you're going to have in your system I feel like we we're kind of slightly diving into toomics now and and that's a a long topic but that's that's very interesting and um yeah I I pretty much agree with what you're saying it's very important for for the the state coin to have inherent usage and for the protocol to have like organic yield as well but the and you were asking who's paying for the the liquidity and that basically most of the time the the governance token holders and and that's why also the token mix comes into play and and the the governance tokens needs to to find a way to be profitable as well so I think yeah that's why I I I really like uh the uh how do you say the revenue sharing tokens as well because if the protocol is overall uh profitable then everyone can find uh it's a way to to take um uh the most of it and yeah that that was my point yeah I think the landscape changed in a way that I think the level to enter this Market is harder than like yeah last cycle of course because now we have established player you have big pockets and earn money somewhere and then they spend it on adoption on real how say they can sustainably pay like for liquidity and that's that's different you have a fresh stable coin so I'm I'm not sure I got your point the thing is you think is it harder to enter this Market as before is it the same or maybe it's a question for all of you uh I the way I see it in in that cycle is way different it's like incentives are not tokens anymore like protocol who's who's been growing the the the most recently don't even pay any incentive that distribute points basically you just preempted my next question so that's good so so it's way different from the pre previous uh uh cycle and again it's a slightly different for us because we don't rely on external liquidity and we actually uh provide a way for those who need external liquidity to to build efficient liquidity thanks to our design so it's it's a different stable coin design but yeah I think uh the this cycle has been driven with this point system but at some point like real money is real money and and revenue sharing tokens are Revenue sharing tokens that's kind of a certainty you you're getting uh value at some point whereas point is basically V is dumping on on retails yeah but Point yeah if you look at the neutral we points it's like a it solves a lot of problems basically it's not yeah that's very convenient of course yeah it gives more control to the projects right but you know what's interesting is that we just talked about locking liquidity before right so creating certainty paradoxically points are the Opposites so you're locking in rewards and getting them later on at a specific date but the liquidity remains uh well available at any time so it creates a lot more trust obligations towards the project because if they screw up and most of them have because people have very high expectations well uh you're screwed your project is basically done if you fail your biggest Point campaign early on uh however what's interesting compared to for example liquidity mining is uh when you're doing liquidity mining you're going to have a constant stream of rewards that distributed and since most project use their governance token it can create that's not the case for everyone uh basically constant sell pressure on the assets and if you don't have the demand that's basically going against it you're just going to have a token that's going to be slowly going down so the difference is that if you're using points and even Seasons like E5 is doing many others are uh you're basically releasing the token in one wave each season let's say three month six month you're releasing 1% 5% 10% of the supply so what's happening is that if you're doing this there's one huge big liquidity event and you can call us and do a liquidity Ops to prepare liquidity for this and uh then you're okay for the next three six nine months so it creates and I've become a believer in this and I'm a points hater by the way that um doing seasons and distribution at this time creates a healthier liquidity than doing incentives in one go that's something I've been thinking of like I wish we could dive deeper into this but I think the were little red numbers on the screen are telling me that I've already overstayed my welcome so I just wanted to thank everyone for coming out um and I'm sure we'll be following up these discussions um after the session and elsewhere so feel free to flag any of us down and and get our takes thank you all thank you very much