PANEL: Dialectic, Curve, Gyroscope, Gauntlet: Optimising Stablecoin Liquidity

next up we have a panel about optimizing stable coin liquidity balancing incentives and risk across platforms and on this panel we have alesandro Boer of dialect Martin of curve ARA of uh gyroscope uh Gabe of Gauntlet and it will be moderated by Sonia from steakhous Financial let's give him a round of applause hey guys hi hi everyone Hi everyone uh thanks for uh joining us we're talking about uh stable coin liquidity today um it's probably going to be quite technical so um let's start with a round of introductions um from the end cool yeah hey everyone um alesandro I'm with dialectic um for those of you who didn't see my presentation just a moment ago um we are major liquidity providers on defi deploying on stable coins eth and Bitcoin uh it's fully onchain yield generation mainly through providing liquidity to amm Landing markets Bridges or anything else that pays good yield hey everyone I'm arah I'm a co-founder of gyroscope I also did one of the uh first phds on on defi completed a couple years ago and uh gyroscope focuses on uh creating super liquidity for stable coins we have a decentralized stable coin uh goid that focuses on being as liquid and resilient as you can in the form of a of a decentralized uh Reserve back stable coin and we also have a product called ecls which uh is a more efficient liquidity pool type uh that also uh keeps the ux for LPS uh simple yeah I'm Martin I represent K here who is like a sponsor of this event and I play like a dual rooll I'm I have a back tech background but now I doing more B stuff and curve is like an amm for stable swap so one part of our business is stable coins but curve also has a stable coin itself Cur USD so yeah depending on the dynamic I will talk either one side or the other side we will see hey guys uh my name is Gabe I work at a company called gauntlets um we do a variety of things both providing sort of advisory and optimization for protocols around both incentives as well as risk so how much incentives should you spend how should you reduce risk in your protocol um we also provide uh management of stable coin strategies for yield generating strategies through a protocol that we've built called era as well so both kind of providing advisory on how to save more money through incentives reduce risk for protocols but then also how to maximize yield for the Stables that you hold at the same time cool thanks so maybe to start high level um I would like to hear from each of you why stable coin liquidity is important and maybe you can weave in like the difference between uh primary liquidity and secondary liquidity where applicable yeah I mean from like our perspective as as liquidity providers we mainly care about like the slippage in in the pool so like what we try to optimize when we work with protocols and and provide liquidity is to get the users the lowest slip BGE on on any swap that they make and that depends on on where the liquidity is deployed and how much liquidity is there um but in in in terms of like primary versus secondary any stable coin that has like not instant liquidity that you can't like automatically redeem then it's very important that there's secondary liquidity so that lending markets that use the stable coin as collateral can liquidate into the secondary market and that opens up a whole new set of use cases for the stable coins um so yeah so so for me it's mainly about like having good slipage on on swaps and good price execution for for the users uh yeah from my perspective um stable coins are basically like the killer crypto use case and if you're coming out with a new stable coin but you don't have very good liquidity right around the Peg and like ability to actually like have people use the stable coin and it's actually right around Peg uh it just makes it a lot harder to to actually use your new your new stable coin so that's like part of the motivation here about like how do you design systems where you can get this like just very efficient uh ability to to swap in and out right around Peg uh primary I think what you're getting is like primary versus secondary Market liquidity so like primary Market being like where you would mint and redeem a stable coin for like some sort of underlying asset and secondary Market where you would uh swap through like liquidity providers for instance and this is uh in gyroscope at least like part of the the foundation of how we built our design you we built this uh this primary Market mechanism so that it can handle kind of like the extreme parts of the the pricing range for your stable coin specifically so that uh your secondary Market uh LPS can have like much more efficient uh liquidity position so they only actually have to focus on the region that's between uh the primary Market bounds and and the rest of the of the pricing region is just handled by the primary Market yeah I think if you go back then the high heart rate of every stable coin is like the P to the dollar most of stable coins out there so it's like the quality it's very visible basically and if you have a deep liquidity the pack is closer so it's like it shows the quality of the asset at the end basically so that's why cve has like we are like a unique position in a way because and there's no primary Mark primary Market is like permission for curve USD so you have need a position to go back basically but we have because we are an amm we can use it in our own pools or we we we push for it to have it mostly used in our pools too and we own the technology itself to make stable swaps very um yeah dense basically very near um trading very close to the pack basically so that's yeah so there's effectively two things you care about when it comes to trading internet of stable coins you care about speed and you care about cost so on the speed side you're about to get liquidated you need to top up your position you need to trade at a stable coin position really quickly um that's when you're want to use secondary liquidity you're going to want to go directly to the market trade immediately out of it you need that liquidity to be really fast you can't wait a couple days for that trade to go through it needs to happen immediately um on the other side of that you also might care about cost and so the issue with secondary markets is that because they're being provided by third party liquidity providers you're necessarily paying either like direct uh LP fees or like implicit fees through like Market maker spread uh and so the cost of using secondary markets is generally higher than the cost of using primary markets Market um but primary markets are generally going to be much slower because they you're going to be going to the actual stable coin issuer doing a Creator redeem ultimately you're doing the same trade in either direction but it's really about the sort of speed versus cost tradeoff where you're really benefiting from speed on the secondary markets and from cost in terms of the primary markets um so for the purpose of our discussion let's focus more on secondary liquidity um and I'm sure there are builders in the audience that are focusing on rolling out a new stable coin um if you were to build a new stable coin and high level want to start building secondary liquidity my question is where do you start like which venues do you go to and who do you go to um I I guess the the kind of implicit question is is around concentrated liquidity versus full range liquidity um from from an LP perspective concentrated liquidity only is really working and it's very efficient if there is like another liquidity venue that you can like swap against if you need to move the tick so like we provide a lot of single tick liquidity but when the price moves out of the tick then we need to like close the position swap the tokens on an external venue and then redeploy in in the new tech so if if there's only a concentrated liquidity pool that is like uni3 style so not like gyroscope full range um then that is a lot more difficult for LPS to manage so my recommend would be to either have like a highly concentrated stable swap curve that is a full curve so Notch based or have like a full range univ V2 style pool with a univ V3 style pool that is very concentrated and that is efficient to to Arbitrage against yeah I think it depends on the market you're targeting at the end because if you if you are a small or stable coin then it's better to have maybe not a rage based I I guess it depends on the market so if you have a Unis swap B3 position somebody has to manage it and you need somebody to manage it because it's like a it's h it's not for you need professional ones doing this it's complicated at the end and if you have only low liquidity and most of the coins at the start have more deviation from the price so you would profit from curve of course because then you can have a low liquid with some denseness and then you don't have to care about anything at the start and then at some point you should add other uh yeah position managed liquidity and maybe you can take the learnings from the one you have and see which trade has been happening the old on the full range basically and then you take this over and make a range one and I guess you need both of them because what we did see that yeah we have shock in our Market sometimes and then what you did see uh is that Unis three position move out uh of range and then you can't trade it anymore and it makes the shock even worse so we did see sometimes then if there's like a curve liquidity and also un and then uh trading happens on curve at this point and somehow you need you should have PS at some point because that's a resiliency yeah are you saying that the trade-offs are kind of robustness versus uh Capital efficiency between you know curve and3 Capital efficiency it depends if I look numbers some time ago it's curve and and Unis it depends on the ability of the people managing the position of course but it's it can be equal so so if you have a lot of money you can pay something somebody who is managing your position very well and then you get more capital capital efficient with positions but yeah you need good people and to pay for it basically yeah I totally agree with that like I think ultimately the question comes down to the sophistication of the actual liquidity provider right so if you've hired a professional Market maker to come in who can like really quickly rebalance your liquidity and you're on like a high throughput chain using something like B3 like you can very closely resemble even like a curve style position If you're sort of rebalancing based on the current price of the token can even improve on curve because you don't have a lot of liquidity that's sort of sitting out of range um which could allow you to get much more Capital efficiency and so if you're really sophisticated then like using a V3 style position is going to be really effective at allowing you to sort of maintain the capital efficiency if you're less sophisticated than using something like curve which really just kind of set it and forget it is going to be sort of optimal for you um the other kind of consideration there is like where is that liquidity coming from right so if you using something like incentives and something like curve might be sort of better to your benefit because the people that you're incentivizing are very unlikely to be highly sophisticated liquidity providers if you're doing something along lines of like protocol on liquidity where you're deploying your own liquidity or maybe hiring a market maker deploy your liquidity for you there you're probably much more inclined to use something like V3 or a concentrated liquidity position given that you can sort of up the sophistication of how that liquidity is being managed over time one thing I would add on on top of that uh and I I think that's a good way of framing it first by the way is of course like who are your liquidity providers and how sophisticated are they and which venues are actually suited for them but then on top of that I think you also want to ask as like the the stable coin protocol itself where do you actually want to incentivize liquidity and one of the downsides of taking uh uh of using some of the some of the simpler protocols like like curve and and balancer for LPS is that you also get like less efficiency uh because your you're pricing over the whole price range and at least if you can uh if you can even if you don't uh even if you want wide range liquidity you probably don't want complete range liquidity so for example if you're like a new stable coin at like the very extremes maybe you you even want pricing from like 20 cents up to like a150 or something but you really want to be spending your incentive Budget on uh pricing other than that in a lot of cases I would argue really no um and in a lot of cases probably argue that you actually want like even to to tighten the the region you're actually incentivizing um and it would depend on how you've actually built your stable coin and can you reason about like where uh what pricing is actually likely to come about and we built uh gyroscopes Epps basically to do this for gyroscope uh and it also a lot of other people are finding it very useful at the at the same time for for the same reasons but where you can basically set up you in one simple pool what should the liquidity profile be that gets you as much range of liquidity that you want and like kind of the concentration of it that you want for the state that your stable coin is currently in uh but not more than that not kind of going further than that um and then set up that pool which is then very easy it has the same same ux as as any other uh balancer pool uh and it's very easy then for for any type of LP to come in and LP for the specific area you actually you want to incentivize can I add something quickly yeah um just a thing that pop to mind is also if the stable coin you have is yield bearing but wrapped so it's not like rebasing but it goes up in in price over time because it's acing the yield as as a price appreciation the concentrated liquidity also becomes a lot more difficult because inherently the the fair price moves out of take every couple of days probably at least so as a liquidity provider those like single take liquidity ranges you need to rebalance very frequently otherwise you're just going to end up out of out of range and then if you're incentivizing the ranges on on something like Aerodrome and V Drome then you may be paying all of the incentives for a tick that has very little liquidity and then you're paying Som LP 2,000% APR but you're not actually getting any liquidity on that TI until someone moves the liquidity over I'm curious I don't think a lot of Builders have much context as to what uh the LP's perspectives are and expect expectations are for return hurdles of course you're not just providing a service for free so I would love to understand from dialectics point of view like when you choose to get involved in providing liquidity what are some of the like economic expectations that you're looking for um I mean it really depends like we maximize risk adjusted return so what we are really after is like yields that are above or justified by the risk that we take so the 80% of the time that we spend is actually on understanding the risk of the protocol and then once we have an idea of what the risk is we can compare it to protocols and opportunities that that are in the same risk category and then we match the returns of those so like all pools that are high risk should have a higher APR than all the pools that are low risk so for us it's really like we look at the risk first and then we look at what are other opportunities in a similar risk range paying as incentives and then we see if it's an efficient position to deploy um and and like the the exact numbers really much depend on on like market conditions like now the yields went up a bit but a couple of months ago they were lower so it's really like Dynamic and changes a lot just to double click on that risk uh framework um so I can think of you know like smart contracts risk and maybe like bridging risk but can you just um unpack that a little bit for the audience of what what are the considerations of risk sure sure um so so it's it's kind of like multiple categories I mean of course smart contract risk is probably the biggest one because just like historically most of the money that was lost in D5 from LPS was due to Smart contract exploits um in percentage that's probably over 90% of of all funds that were lost um but then we also especially on stable coins and on like eth Peg assets we need to look at Peg stability collateralization understand how the liquidation mechanisms work what the liquidity profile um and then also things like upgradability or the smart contracts upgradeable is there a time lock how long is the time lock who can upgrade so it's it's like full spectrum and and basically what we look at is like what could go wrong and make us lose principle and then we try to mitigate that as as much as [Music] possible yeah so I think like sort of the point out of like hey like the biggest issue that you have with stable coin yield is like what if you lose money what if the token D pegs like how do you manage that and definitely a lot of work goes into that when those DPS happen they happen very suddenly like look at Luna it's completely stable and then all of a sudden clashes all at once the other thing that people don't maybe consider as much is the sort of stability of the yield right so if you have a token that's achieving really really high yield but that yield is highly variable the thing to consider is how often you're going to have to rebalance n of that token and then is the costs to rebalance n of that in out of that token um the token that just has a really high yield right now but that yield is like highly variable might then require you to then be rebalancing to a different token and then incurring the cost to do that rebalance whether it's through sort of doing the liquidity through gas costs uh things of that sort and so through the yield strategy that we do like we definitely take into account the the risk of dpeg smart contract risk Etc um but the other side of thing that we also take pretty closely into account is like the stability of the yield itself and while a token might have really high yield at one time uh you really want to be investing in tokens that are going to have like long track records a very stable yield to avoid consistently incurring these rebalancing costs I want to add something we now speaking about the black professional Market was like there like rational liquidity basically but on curve we see a lot of like irrational or lazy liquidity so they're like pools we pay like nothing basically and there's a huge amount in it and it's interesting that in a way we need like uh professionals providing liquidity but there's also like people providing liquidity for free basically and it's not it's quite a lot and for us is is also about um it's an interesting topic because it's something we don't know we don't know why people do this they just do it and are they like individuals or institutions or they may get incentivized of train um yeah okay that that's not a possibility yeah yeah I didn't yeah I'm an own guy so didn't think in this but yeah that's possible but I guess it's somehow that's our strategy we now do Rec curve it's some kind of soft power an amm can have basically if it's very trusted then people don't care that much about the smra risk they say if it's sitting in a wallet or sitting in a pool yeah I'm too lazy to Move It I myself have position all position which earn like nothing I don't have time to move them to manage them and uh that's like the unknown basically in this yeah yeah I mean I think a lot of people like to kind of think of this as like irrational liquidity like I I sort of tend to agree with you that it's either sort of through offchain agreements or incentives where you've basically signed with a market maker to provide that liquidity and then you're providing them some sort of kickback I think the other side of that as well is like protocol and liquidity so if I'm launching my own stable coin I have a large treasury I want to make sure that my secondary Market has a lot of liquidity to attract future users I might want to have really deep uh liquidity on somewhere like curve or Unis swap in order to facilitate that and so while maybe I'm taking a loss from sort of an opportunity cost perspective I'm basically paying for that liquidity to exist to sort of further the existence of my own token good example of this would be sort of like s e eth Peg on curve it's like a multi-billion dollar pool probably doesn't really need to be that deep um but through that Lio is getting really deep liquidity for the native token it's may not worth it from them from an opportunity cost on the S deposited it's definitely worth it from them and uh facilitating the growth of the SD ecosystem and so I think that's kind of the other reason that we see a lot of LPS acting irrationally when if you kind of really understand the actual reasons I think usually LPS are actually quite efficient at rebalancing their positions do you guys have good sense of um cuz like last cycle it seemed like you know a lot of the incentives were token based in incentives onchain but I get the sense that these days there are these you know increasing number of offchain agreements that are struck between you know protocols or stable coin issuers and lpus themselves um do you have a sense of like rough percentage of onchain offchain incentives um in this current landscape I mean I can give a rough number of how all portfolios look like and it's more than half private incentives now but pretty much since like five to six months so it's a recent phenomenon relatively yeah yeah I mean I think I think the reason you're seeing a sort of move to offchain is that liquidity providers are incredibly mercenary right and so they might be taking incentives during periods where the liquidity isn't really necessary so markets are incredibly stable things are going well like yeah you're happy to take that yield markets start to get throy that's when the liquidity is most important for your protocol that's when those sort of mercenary uh liquidity providers are going to pull out and so having offchain agreements of like how consistently that liquidity is going to be provided and sort of slas around when how those liquidity can be rebalanced are really really valuable to protocols to make sure liquidity isn't disappearing right when they need it most even if it might cost more using like offchain incentives versus onchain yeah that's in a way you that's why you want to have lazy on chain you want to have lazy liquidity because they don't move out in a risk they don't see it they they get front front run mostly and some of the crisis they disappear in 2 days or 3 days they're gone on so you still have them basically because if you have professions okay if you have deals then uh they have to keep it up the side but if you have like farming like independent organization who just go for the money at the point they say risk they see the risk they will just go away and then you have a a deeper problem than before basically well talking about incentives I think um take PayPal for instance you know they were seen to heavily incentivize um the utility of PUSD on Solano recently and we saw um this circulating supply of PUSD Skyrocket on salano um I think it was actually through Cino and other bwing and lending protocols but once they stopped incentivizing uh the circulating Supply just went the other way so um it's interesting that you know these things can be so um cyclical based on where the incentives are um but you know that doesn't really it's not a sustain way of creating utility for a stable coin so I was wondering if you had any views on um how a stable coin project can sustainably incentivize the the growth of um of their Sable coins yeah so i' I've done a lot of work with various stable coin providers and defi protocols in general around incentives um the most important thing about incentives is that like it can't be the end goal the reason a user should want your token shouldn't be because you're incentivizing that token and generating yield it's a great way to bootstrap a lot of activity and a lot of users early on it's not a great way to maintain those users in the long term if there aren't other ways to generate yield now what's useful about incentives is quite a lot of protocols care a ton about the TV that you already have if you want to be listed on protocols like Morpho and compound and start generating sort of real yield on your token you need there to be enough tvl and things like secondary markets to enable that to happen and so incentives are really really good at this bootstrapping phase where you sort of have this like apples and oranges problem where it's like how do you get liquidity in the first place to be able to start generating yield on your token how do you get your token in people's hands but if there's not an actually thing for people to do with that token afterwards and the second the incentive program ends of course they're going to pull out and so the general sort of idea is like how do you make sure that users have a thing to do after the incentive program ends and so you're not creating the sort of cyclic nature of incentives liquidity increases incentives drop and then liquidity decreases I think what you can frame it you know there like in normal money there's like a store of value and um medium of exchange basically but crypto invented like the third category and this is the stable coin as a speculative asset and we see that a lot not it's PayPal not they are like a serious player I guess but many sa counts get just create they do a stable coin and then people Farm It To The Ground basically and it just disappears again so it's just a speculative asset and if you do this yeah it's very it's hard to to come over to the next basically next uh who is a medium of exchange and medium of exchange means you have to give utility to the dollar and best is to have like unique utility for your dollar because yeah Market or utility and this is like the hard part you know because pay up front yeah can everyone but giving like a a unique um property to your stable coin that people want to hold it or use it that's like the first goal and then the next step is and this is like the voodo of money so St value the end goal is you hope that people will just hold it in in their um treasury basic somewhere and yeah just to say uh we we cover all of the cus is covering all of this uh range basically we have speculative asset because you can go taking the market go long we have like Yeah medium exchange because we are at X and now we have out the S saving curve USD it will come out next Thursday who you have uh pass uh can create passive income just a saving and I think you have to cover all of them if you can and this is maybe the part where onchain or def5 shines in the sense that we are like able to create it itself but if you're like PayPal you have to create it however you do it you so okay they have a Medi of exchange they can force it somehow but the store of value side maybe they don't have to care because they have it off chain anyway so yeah that they already people are already holding the dollar in their account so that's not their goal so there is just to be another Min exchange who goes from offchain to onchain basically I would love to hear gyroscopes cuz you are you know you have your own stable coin how do you think about creating the utility and um its role as like either medium of exchange or store of value yeah from from our perspective incentives are best when there's like a chicken or the egg sort of problem where basically if you can get to some sort of scale and you if you reach that scale you think that uh that there're actually like sustaining use cases that are that are available at that scale so uh like you were saying getting on like Moro markets uh or or getting enough uh uh kind of liquidity to get like further Integrations that that can actually be self- sustaining in terms of people being able to use your your your token uh incentives uh are one way to get you over those hurdles of the the requirements to get those uh those Integrations and also to get you to sort of like the the place where you users are finding it very easy to actually use use your system if you if you start a new stable coin but uh like it starts at zero or very small uh just the uh the slippage to get in and out of your system makes it like basically impossible for for any normal person to use it uh but even getting just like a few million in like already starts to overcome that hurdle and then you can worry about the next hurdles yeah and yeah I mean I pretty much seconded everything that that that was said here um what one maybe small thing to add is also that like high aprs are a good marketing tool so like if if you have a pool that is paying a lot of APR even for just two weeks you make got a lot of users who just find out about the protocol they see the big number they do some research they read the docs they understand the protocol and then if the yield is not there two weeks later they still did the work and still now have a better understanding of your product so even just that is is probably beneficial um but then if there's no real utility for the token and and the incentive is gone and people stop forming it then they will just put the liquidity somewhere else that has incentives um do you guys find uh find a lot of like uh incentive programs for creating utility and Integrations over just you know liquidity secondary liquidity yeah I mean like most of the protocol calls that we work with they have some um liquidity kpis that they need to meet for getting listed on Landing markets for getting listed on centralized exchanges and and things like that so it's usually they need a lot of liquidity on specific pools for some known period of time and then what happens after that it's either it takes off or it doesn't um but but most of the time like that the flywheel kind of works where once you have this utility once you can get yield on lending markets and so on then there is a additional reasons for people to hold a token and then you can scale the incentives down and hope that the thing takes on a life of its own yeah it's explicitly something that we have Gauntlet have been helping protocols with so we we both are a vault curator on Morpho so we're basically managing risk for various Morpho vaults um and then we also provide sort of both incentives and like protocol own liquidity services for protocols as well and so a service that we often are providing are people that want to get listed on Moro come to us and basically ask how much liquidity do I need in any secondary markets to feel safe with them Morpho listing we can then basically facilitate that happening both on how do we sort of bootstrap that liquidity through protocol and liquidity and incentives and then also on the Morpho side of like how do we spin up new markets as well as manage the risk for those markets so it's very explicitly something a lot of Protocols are interested in yeah I think the landing Market is interesting because you want to get stick it somewhere The Landing Market makes the the the liquidity flow um lower basically so it get you add a usability but you also get it stuck and that's a good thing basically this might be kind of a technical question but like if I have a stable coin and it's got X tvl like how do you know how much liquidity you need no it's it's a great question so the biggest thing that we look at was sort of morpo Market listings as well as just asset listings and other lending protocols that we gaunlet work at um it's really sort of focused on like slippage versus like size of position so what we use at Gauntlet At least is we have sort of stochastic simulations where we basically simulate okay if the market suddenly drops in a certain way the token might deeg in a certain way that's like based on historical data um how many liquidations do we expect to happen how much trading volume do we expect to occur all at once and so if that number is say 1020 million you know the liquidation discount for like liquidating is like a 1% discount uh to Liquidators you need to be able to trade out of that like say 10 or2 million at like under 1% slippage in order to like allow for the liquidation mechanism to occur for Lending protocols and so basically how we think about it is like what's the max max dpeg that we might expect to see how much liquidations is that Max dpeg going to cause how much liquidity do we need on secondary markets in order to support that liquidation and then sort of monitoring that over time right both making sure that there is enough liquidity to enable a sort of listing in the first place and then also like how of liquidity conditions changed how how is like the position within these Landing Market changed as well over time is that number pretty variable depending on the design of the stable coin so like say cdps versus like Fiat back it What It Takes into account is like the the volatility of the stable coin and so if you have something that's like sort of more centralized and like backed with a sort of on toone Central entity you might feel a lot more comfortable with like expecting a lower number of liquidations because you don't expect a dpeg to occur so if you feel a lot more comfortable with like less collateral and less liquidity for something like say usdc as opposed to some kind of newly launched coin that like nobody's really heard of um if you don't expect a large dpeg to occur or if a dpeg does occur you only expect it to be say 1 or 2% versus like you're sort of worried about a very large dpeg of 50 or even 100% that changes the risk profile of the coin quite substantially and so there what you're really doing is you're looking at sort of both historical data around the token itself or if that doesn't exist really deeply understanding what is the mechanism for that token uh and how how safe How likely do we think a dag is to occur I think if you look at the sophisticated Market you had a lot of money you can hire something do it for you like you basically but if not then you should just look how others do it you should look like for a similar coin token and see how they did it and replicate basically cuz that's the cheapest way you can do it yourself somehow and then you have a learning process during this doing this and I think the difficult thing is to find a matching stable coin who is like similar to yours because then you find out yeah we replicate all the business idea and then maybe yeah you don't do it anymore but yeah I I have a question for you actually are you monitoring that on theong running basis and if like the slippage goes above the threshold then like the curator start removing liquidity From the Vault and delisting it even at some point yeah explicitly so so yeah we're we're basically monitoring onchain liquidity in sort of real time um if that liquidity starts to dip then that would then cause us to start to change the either like Supply limits or like the collateral ratios on these vaults uh with the goal of basically like drisking um these things now of course like the we we basically expect to have like much more liquidity on secondary markets than is actually necessary um so that you know like I say 10% drop in liquidity like shouldn't cause us to panic where we're sort of taking into account like the the historical volatility of liquidity as well um the other thing we look at is sort of the concentration of liquidity providers so if there's like one LP that owns 100% of the secondary liquidity that's obviously a lot more scary than if that's Diversified over like say hundreds of LPS and so that's the other thing we consider is sort of the concentration of that liquidity as well um we have five minutes um one last topic I wanted to explore was um multi-chain or cross chain liquidity so obviously you know this year salana is really um been a standout chain in terms of increasing uh circulating supply of stable coins um on ethereum land you've got you know L2 is really starting to um overtake mut in terms of number of transactions so when you think about building liquidity and this fragmenting infrastructure um How would you advise projects to um take advantage of the evolving nature of fragmenting um infrastructure and uh maybe the increased burden that comes with trying to build liquidity and you know all these venues or places I would say they should make a strong bet basically because you can play on every Market the technology is not there basically so it's like or maybe we're coming at this point who it works but you have to say that's my home home chain and they going to bootstrap there or maybe add a secondary at some time because otherwise yeah you don't have the money to play all on every market so that's like I would that's my advice basically so it's the chains that you want to focus on and yeah because otherwise you get will get lost because somehow for me every every chain is an independent cities or or Village somewhere and we have very small villages who nobody goes there or only the guys living there basically and if you you you don't want to trade in a in a rural Village somewhere you want to trade where your community is where your taret group is and all these things otherwise it's just yeah it's endless you know they're like yeah many villages out there in the world I don't know yeah I would add a little on top of that that where you where you go to a new chain you want the user experience to be good on that new chain so it's the same fundamental problems you had in first setting up your system for a stable coin in particular you want uh it to be very easy to move in and out of that stable coin on the new chain so you have the whole new like sort of setup process of getting good liquidity for that stable coin and being able to support like actually very good liquidity right at at Peg so that people can move in and out with just like a kind of like a basis point or two of of slippage ideally uh and that takes resources and it also takes uh uh maybe you need to get some some actual protocol infrastructure up there and like actually then relay messages back and forth about what's happening on different chains and you have to then also like incorporate that that bridge infrastructure and that bridge risk into your protocol and to add in a way it's also that's why mainnet etherum mayet it's still huge is because if there are many stable coins on mayet and it's like the main market so people are ready to pay for the for the gas because yeah it it's more expensive to trade but has deeper liquidity and of course there other chains Solana I don't know personally very well who um yeah establish themselves as new new Marketplace and then it's it's the same if they are able to attract a lot stable Co Equity who stays there who doesn't move out we did see many EVMS who made things to attract a lot of tvl or also like stable coins but then as soon incentive is disa appearing it's yeah it's a waste it's just it's something that I see changing over time so I agree with both you that like the current the status quo is very much like each chain is sort of its own sort of Walled City where if you want to have lending for Lending on ethereum you need to have liquidity on ethereum if you want to have lending on base you need have liquidity on base and those are like almost thought of as two separate things I think as bridging technology gets better and it's something we're already starting to see today I think that's going to increasingly change right of like there's no real reason to have two separate liquidity pools to exit a position across multiple chains like more ideally liquidity all exists in one place and can be used for any any chain that's already here today and so there's already Fair number of protocols out there that sort of allow for these like offchain solvers to sort of like provide that function so you have you uniex you have cow swap you have bbop um that are starting to do this now liquidity on those protocols is is fairly small and they only really support like major tokens but it's definitely a problem that I see getting better over time as like cross chain functionality improves as well as like people sort of more adopt these like solware functionalities for allowing like offchain execution for onchain TR actions yeah I think the Sol solution is like now we had like the technical solution was okay you have pools on every chain and curve is like it's not a curve product but it's called cross curve they use pools to synchronize over different chains but I think the Sol um it's the it's a better uix bace Club because people they don't care on which chain liquidity lives they want to trade an asset to another one and say yeah I want have this asset and for the most of them they don't care about this the security of this special evm and they don't care if if it's not so strong maybe professions one do but most of the evm chams or chains who get a lot of liquidity they're like serious players and they're like safe enough basically for this so yeah just just as an anecdote like The Gauntlet vaults that we manage through ERA this is explicitly how we provide rebalancing we're not using liquidity we we provide uh fund management across of multiple chains we we're on base we're on ethereum we're on polygon the way we do rebalancing is generally through these solver networks and we found that like liquidity is much better on these networks especially when dealing with like low liquidity chains and so this is already something that we're doing for rebalancing now I think for more sort of instantaneous transactions or like time is of the essence you need to do atomic transactions like liquidations onchain liquidity is still really essential but I I do think we're even already today seeing sort of that paradigm shift away from like each chain being a w City and more like each chain being more focused on like a specific application yeah maybe one one last thing on my side as well is that um when like when you expect liquidity providers to provide liquidity to your token on another chain there's like new levels of risk that get introduced so there's like the risk of the new chain what the security guarantees settlement guarantees of of all of that but then there's also all of the bridge exposure where there's kind of a trade-off where if you use the native bridge to a roll up then that's very safe but then if we need to get out of the out of the chain then we take a 7day basically no yield opportunity cost um so so then either the the incentives need to be higher on the rollup to kind of offset the opportunity cost that you need to get out or you go with some lock and mint uh bridge but then that it's usually also a premium on the risk because then we take on the additional bridging infrastructure as a risk and then we have full dependency on the bridge not going down the underlying assets not being exploited or or something like that um so so that's like pros and cons but in our experience usually the the yields on the rollups and on the Leo twos need to price in some premium for the risk that's your risk adjusted kind of framework um cool well HS up but um if we could go around for to wrap up um if you could provide one piece of advice to stable coin builders on liquidity um what would that be quite General but I mean I guess the biggest thing that I would say is just have a plan um I think that a lot of protocols kind of come in and they spend a ton of money they want to like really quickly bootstrap a lot of activity they want to get super popular on Twitter they spend a ton of money they might get a ton of liquidity all at once and then that money runs out and then all of a sudden like they're completely unknown again um and so the biggest thing is really just before you spend a dollar like have a really clear plan of like what kpis are you tracking what do you care about what are your actual goals here what is the long-term plan for sustainability for your ecosystem and then monitor that plan over time once you go live like how are those kpis performing how are things doing how can you pivot the program that you're running in real time to make sure that you're actually achieving the goals that you thought you were and so pretty pretty high level but I'd say that's my biggest piece of advice I would say don't make spray and pray because I did see not save up coins who did like they used their coin to do BD in the sense to to deploy it on their friends or their Network deploying pools and projects and in a way yeah May you you shouldn't do that I guess because it doesn't help really with the liquidity it's good for your network maybe and maybe it's worth too but it's not about liquidity if you do that so you should avoid that and some do it because they think it's like less risk they say okay if I have my CCO many different Dex uh uh dexes then it's more safe yeah I don't know it's maybe you can do that but I think you shouldn't I say think about where you actually want to incentivize liquidity uh and make sure that you're using your incentive budget as as most efficiently as possible to actually get the liquidity that you need to like get to the next steps for mostly in terms of Integrations but also in terms of like what users need uh and then make sure you're not spending your incentive Budget on uh uh parts of the pricing range in particular I guess that you really don't need um yeah and just make sure that you're attractive to liquidity providers on like a risk adjusted basis so so there's a lot of things that you can do like adding a Time log to your upgradable contracts like paying a bit more to get like a very good auditor these all like small things that really like give the LPS assurance and then also allow you to like pay less for the yield because all the all the yield should price in some levels of risk and I think the protocols themselves can do a lot to decrease the risk and therefore be more attractive to LPS and and therefore have to pay less incentives to LPS um in in order to get the liquidity that's really helpful thank you guys and uh Round of Applause for our panelists thank you too thanks for hosting