Liquidity Games - Panel featuring Andrew Thurman, Mounir Benchemled and more...

bonsoir hello hello everyone bonsoir this is the future of france right now please applause agner munir and julian please hello is denver great to be here hello hey hey guys thanks for having me for the people coming please take a seat and we are just starting the topic tonight is liquidity games so we are talking about liquidity in blockchains and cryptocurrencies because we are here for that uh the first question is could you guys quickly introduce yourselves please so agner sure hi my name is agnem i represent d gate digit is a decentralized exchange built on zero knowledge technology we focus on spot limit order trading and so one of the key features is grid trading a decentralized grid trading a feature which is quite popular in centralized exchanges and also we have permissionless token listings so please check it out degate.com thank you um munir founder of powerswap uh powerslab is a decentralized liquidity aggregator on ethereum in various other chains um we've been around since 2019 and we are empowering our users from our ui but also other dapps like ledger metamask and others so what we're building is really is an infrastructure for other d5 protocols and apps to build on top of in order to access what you call best execution platform julian hey guys uh my project swivel was actually started two years ago here at denver as a hackathon it was my first time trying solidity and honestly it's just been a great ride since what we exactly do is allow folks to collateralize or rather take an interest bearing deposit and turn it into two component cash flows one would be the interest to some point in the future and the other is the principal token allowing you to redeem your cash and the really end result for users is that allows people to either lock in a fixed rate that can either be relatively high based on the current market conditions or can alternatively just speculate that rates will go up or down yeah cool thank you guys um the first question is what is your opinion on the flow oh sorry what is your opinion on how the liquidity should flow from a blockchain to another one i mean from ethereum to its layers or from solana to ethereum thing like that so who wants to i'll go first i'll go first um at the end of the day i think everything is always driven by arbitrage right whether that's regulatory or prices in different ecosystems so i mean as far as liquidity goes essentially the paradigm that i feel like has developed is obviously you have these insane ecosystem incentives from different players this attracts obviously some initial liquidity and then really all the money is made for the professional liquidity providers that are able to kind of either do time-based arbitrage or whatever inventory risk that they may be willing to take across chain and arbitrage these environments right i think this is really where you see a lot of actual growth at least from these other chains is when you start to actually have some minimal liquidity base for actual players to arbitrage i like the arbitrage approach because we can also look at it in a kind of a cost arbitrage um everyone used to be on ethereum literally a year ago and those new blockchains or new layer ones were emerging and the first arbitrage that we see was arbitrage based on gas fees on costs that was just becoming insane and even though it was not acceptable to go outside of ethereum like everything was happening in ethereum the main reason was composability like everyone thought that once we step out of ethereum we're gonna break on possibility there's nothing that can be possible which was proved to be wrong and i guess arbitrage was the main incentive in because it was just becoming insanely expensive on ethereum that i think was the first iteration in order to open the door for other chains to to emerge but the other misconception was like it should ha it has to be only evm compatible for it to work but to our surprise we see other chains like solana becoming so big that then many other than many of those evm chains so so i think it's more of now an opportunity arbitrage where that we can see it uh proving itself to be working very well uh sure i can add something here um it's really interesting to see how last year we saw the multi-chain ecosystem to evolve um a lot of people were critical saying ethereum is the only one uh others said that there will be lots of l ones that serum killers and look what happened really the users chose where they want to be why did they choose it was of course because of the gas fees because of uh more accessibility to d5 projects but also because was of incentives so how they say in dfi whoever owns liquidity owns d5 protocols so those new protocols no new layer ones new apps they offered crazy incentives we all know the apys that they offered so here we also have to ask the question are these the real users or are these the you know incentive droppers the the hoppers through the protocol so it will be really interesting to see next year thereafter what layer ones will will remain what incentives will we have will we have the same incentive model that we're really just air dropping and and giving tokens to the users who provide liquidity and then they leave the protocol dry so what will be really the solutions can we learn from centralized world maybe let's see swivel finance they do interest rate derivatives uh so so even banks although we don't like to talk about banks here they do need to manage their portfolio the liquidity the industries exposure the exposure to short term long long-term securities so we have to take a step further here and be more professional to incentivize users not just by giving away tokens but really to construct more advanced techniques for d5 protocols to manage liquidity yeah and you mentioned multiple times the i mean rewards from users and recently powers for launch i mean there are tokens and don't you think it's kind of a rigged game because some people are just here to chase i mean those incentives token i think there has to be a sweet spot between providing the right incentives in order to bootstrap and look at that as a user acquisition strategy because the thing is uh once we launch incentives the first thing we will see is mercenary liquidity that's going to emerge very quickly and will try to also arbitrage another kind of incentives the problem is with that it's very temporary uh i would say traction or like perception of traction so i think incentives have to be with a clear user acquisition strategy as what we can see in web 2.0 so if you look at for instance uber launching on the city the first thing they will do is that they're going to pay the drivers to just drive for free um in order to cover part of the let's say the supply in order to attract the users so that the market is going to take care of itself later on on a more advanced stage so i think uh incentives has to come up with this clear and concrete strategy instead of just attracting arbitragers or also mercenary liquidity that we unfortunately seen more and more nowadays so yeah that's my my take on it so i think this to an extent it goes back to the question of whether people that are just there for airdrops are real users um and honestly on your point i think also the differentiation between incentives that are there for bootstrapping and incentives that are there should should be made right um with our protocol as an order book based um you know especially in interest rate swaps we felt like we needed incentives at first right um these are to bootstrap our protocol however there's a big differentiation between i think that and a lot of incentives which should be only there to kick off a positive feedback loop right if you feel that you know some amount of incentive can create a positive sum obviously then it makes sense to do that um we have we haven't seen this a lot so far right i'd say there are some protocols out there that you know temporarily have not at least speculatively traded at some same premium to kind of distort this um but really like that that should be the goal you want to design a system that is self-maintaining and that with these incentives can continue to grow okay and i would like to go back to the flow of liquidity don't you think that uh the cross-chain bridges would lead to in the future to more and more acts like we can see with the wormhole on solana or i mean with the more bridges comes more security or it will be i don't know uh kind of games of uh who's the next hacker to make the big uh the big hack yes um right i think the answer is yes of course when there's more attack vectors there's more risk and i'm just more interested in hearing what everyone thinks about how you manage that as a protocol one thing that i was tracking during the solana hack was of course the peg breaking it only broke after like five hours when there was a small bit of uncertainty whether jump would come in and it only broke down to 22.50 and when that happened there was only in my recollection one salon protocol that triggered their circuit breaker and that was soul end and that is actually kind of terrifying for me right if there are a number of d5 protocols that support leverage or borrowing and the collateral could be worthless and they're not triggering their circuit breakers um i don't know any thoughts from you guys but at the end bridges is a piece of code running on one chain and some security assumptions in order to secure that bridge so no matter how the design is secure if there is a bug on that contract i mean yes it's just code that can that can break any time so it's never going to be as secure as a native blockchain but there is some trade-offs that we can live with and i think the future is maybe uh ensuring those those bridges with some new insurance protocols that some of them are it's been around for years but i don't see a clear solution because it's just a code running on one chain another code right now the other chain in some security assumptions that we put it on design with some game theory and it's never going to be as secure as the native chain um i would like to add here maybe something a bit controversial i think it's very good that these things happening right now we're so early where the first year of a multi-chain ecosystem right now so we have to have this hacks we have to fall we have to get up again we have to understand what level of decentralization is important and what level centralization is important because as you know bridges they do require some level of centralization to manage uh the smart contracts on both sides so what will what will work the best uh for the huge amount of transaction when the whole world will be on multi or how many blockchains so we really need to learn these mistakes right now when we're still quite small i think yes so multi-billion dollar mistakes but okay yeah and i mean again if we didn't have that wormhole hack we would not know that there are a lot of really irresponsible solana ecosystem projects right and um do you know i mean do you know how to maintain a fair uh liquidity between all the blockchains you know at the beginning they were the bsc uh who drove all the liquidity from ethereum now it's on polygon and it's going to other layers one or evm and i mean how to maintain a fair uh liquidity to make people uh earn money or i mean uh try different protocols um so here's incentives and um i think right now in a very gamifying uh stageless but this way so people are jumping different protocols you know they are playing various games earning incentives then they're losing they have rock pools etc but we really want to adapt this world to um new era of personal finance a new era of company finance new era of everything how the centralized finance was working how the mortgages were given how the loans were giving we want to apply this to decentralized finance so right now we're only trying and seeing uh what works really um and yeah so i think right now at this stage is incentives for now and the users are driving this um as much as we can make this more interesting and more user accessible user-friendly simple to use then this will drive more liquidity to blockchain technology i think for sure everything to add no okay maybe maybe we can take some questions from the audience does anybody have a question no we can go on oh sorry yes uh the person uh hello yeah uh yes could you talk a little bit about how self-provided liquidity works like with olympus pro i'll talk about my general thoughts on the topic right um and i can think this kind of relates that there were two big narratives going into the past year which were protocol and liquidity and then uni swap v3 honestly also curve as well but i consider these kind of similar in terms of the effects on the market um and objectively when you start to actually look at olympus pro it just has not performed whereas when you look at things like uni swap v3 it has however these run completely different axes pull together had a really really great objective report where they obviously had a data scientist going on this and they essentially concluded that they were wasting and it would take like 10 plus years to accumulate liquidity through olympus pro for it to be sufficient to their current liquidity program on the other side of this they did feel that it really empowered their community to some extent right and i'd use ribbon finance as the complete polar opposite example right where they've initially started with uni swap v3 staker contracts which were not the easiest to use but were very capital efficient they didn't have to spend as many tokens but where they were they didn't need to and their community was just pissed off so like what ended up happening was just massive liquidity providers would give one tick of liquidity on the use webv3 and take all the incentives there's obviously yeah there's should be something in the middle uh what i can add to that is there's always pros and cons and it's still an experiment i mean it's very new the protocol liquidity i can see a parallel with what we had previously when a project or adapt with the token will launch they will seek to create the market themselves uh that was pre-defined summer like the prettify 1.0 which led to d5 projects asking the community to for help between coats in order to create this market it turns out that it worked very well in 2020 but this evolved into a game of farming which can be good and bad but sometimes cannot be efficient for the protocol so i think we're like coming back to the foundations where i i built a project i launched a token then i will create the market but but who is me me i am a dao that's gonna control my own liquidity so that's those who wants to buy or sell my token they're always gonna find a decent market debt so i think that's that's still an experiment and there are a lot of works that i think olympus is one of the most forked projects nowadays which may tell a story about their success success story thank you yeah thank you very much anybody else um i was just sharing sharing this thought sorry i'm sorry so olympus pro is very interesting uh for me to follow uh i studied traditional finance and derivatives market so very interesting to to follow what is happening in the rise in the fall of olympus project but definitely we see that perhaps the consumers the retail consumers will not be able to support the liquidity alone we know that there are market makers institutional liquidity providers even to to taxes so let's see how this all the new market evolves i i on the note of derivatives i'd give an extra shout out to the primitive team right i don't know if you guys know protofinance but they're trying to essentially establish the idea that liquidity providers are essentially underwriting options right um and so instead of having this system that's just completely based off of liquidity providers just underwriting options in this backwards way they're having them actually underwrite options um so i think they're like you're saying there is a continued development of this sort of industry especially as it regards to derivatives and how you can properly price things or replicate payoffs of more derivatives that are more exotic derivatives right so how the traditional finance again sorry for this comparison how do they manage you know their floors and caps their butterfly options etc it's very complex financial instruments so i'm sure we will adopt some of the best practices here what we've seen a lot or like what i've liked a lot so far is just that people are realizing that it's very difficult or impossible to just create great options markets um and are trying to replicate their payoffs right whether it's convexivity or or whatever it might be that someone is looking for in an option or something else defy they're just going around it at this point right um and this is something i guess from my protocols perspective that's kind of scary we run an order book right so if anyone's able to think of something clever we might be screwed yeah uh i got a last question in mind um usually i mean the retail investors don't really think when they enter the crypto game they don't really think about volatility and i'd like to ask you how does volatility could impact the liquidity uh between i mean cryptocurrencies so you need to use derivatives to manage the volatility right so yeah yeah like uh ideally and this so so my project is is specifically with regards to interest rates right and interest rates are extremely volatile and crypto they've gotten better but if you want to manage that risk you need to use derivatives right um and i guess going back you're talking about how does retail get involved this is partially i think related to how do you get liquidity across trainings you build aggregators right if you're able to build an aggregator that is able to simplify all of this for retail and i mean for for integrations it's hard to get like 10 different people to integrate you um then you can actually effectively onboard these people right so i think when it comes to options you'll start seeing things that are aggregating both like a direct option and maybe this replicated payoff um the more and more you see these things pop up the easier it is for retail to just say i like that yield and that's good to me right okay thank you very much um does anybody have a last question before we finish forever yes please hi um i'm just curious what kind of market makers uh have partnered with paris pop um is there any smart market makers that you're looking to bridge with um we have some who are public like uh winter mute and kronos others are like semi or pseudonymous it's like their choice the goal is to expand and to have a large network now we have seven market makers who are active in power swap the goal is to have i don't know hopefully 50 or 100 in in the future so yeah if you're interested happy happy to talk to you so i'd like to thank my co-host agner from d gate munir from paris swap and julian from swivel please upload them thank you very much