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Turning wealth to income

Gas prices on Ethereum finally came down low enough yesterday, into the 200’s, long enough for my early ETH transfers from my mining account to come through to my main account, giving me the gas I needed to finally stake my USDC and wBTC into a couple vaults. Zapper.fi actually recommended the YFV USDC Seed vault, and I used Yearn’s sBTC vault for the main amount.

Since I’m actually pooling assets from various funds that I’ve earmarked for various members of my family, it’s becoming a bit of a challenge to keep things straight. I’m working with a Notion database, with rows for each person, and columns for the amounts of ETH, USDC, and BTC that they’ve contributed. I have another row for fees, where I’m tracking the gas costs in ETH for each of the transactions in and out of the vaults. I’ll have to create some formulas to help compute each person’s percentage of the total pot; I’m not sure whether I can do it in Notion, or will have to do Excel. Ideally, I would do it on the blockchain, but managing three of four Ethereum addresses is too cumbersome.

I finished Mastering Ethereum earlier this morning. It’s a lot less mystifying now, although I’ve still got a ways to go to understand a lot of it. There are ton of links within the book that will take me some time to read if I want to go that far into it, for now I’m going to continue working through the Ethernaut challenges and will figure out how all Uniswap and all these Yield farm vaults work. That’s the awesome thing about Ethereum, all the contracts are public, most of them operate as open source with the contracts right out there in the open. It’s actually quite amazing.

The Unidrop earlier this week has also got me thinking a lot about the difference between wealth and income. Bitcoin, and to a certain extent, the FIRE movement, has really got me focused on savings and building wealth. Right now, my timeframe for net zero was really dependent on the next BTC bull cycle, but the twenty percent plus interest rates in DeFi are forcing me to re-evaluate my plans. I had planned to do some trading and see if I could build my stack higher that way, but the risk/reward ratio has been upended.

I’m still very tempted to move the remaining eighty percent out of my hard wallet and stake it in a vault, but the returns at this week’s levels isn’t high enough to justify. I’m not going to stake my entire stack against contract risk and the other factors inherent in the system for what amounts to one-sixth of my current salary.

If BTC hits $60k, though, that’s another story.

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Uniswap Day

Heaven forbid you actually needed to use Ethereum yesterday

I was all ready to take the plunge yesterday and had moved a large portion of my BTC to wBTC. I just needed a bit more ETH to pay the gas fees for the zap into the vault. I set up a tx between my test wallet and my main wallet, with an average gas cost around 119 gwei. Metamask estimated a two minute transaction time, but after five went by I started looking at the gas costs. “Slow” was now 140 gwei. So I resubmitted the transaction. Five more minutes, then gas was up to 175. What the hell was going on?

Things kept escalating over the next hour, reaching 400-500 gwei. Something was happening. Etherscan’s gas tracker showed Uniswap’s router taking about a quarter of the available gas on the network. That wasn’t too unusual, it’d been up there for some time. So I decided to go on Twitter to see what was going on.

It didn’t take long to figure out what was going on. Uniswap had airdropped their governance token, UNI, into the hands of everyone that had used their service. At least four hundred UNI tokens were available to be claimed by everyone who had ever used Uniswap to make a trade, more, I’m sure, went out to LPs. Ethereum was clogged up with people trying to claim the tokens. Binance had already added UNI to their exchange.

Those tokens were worth twelve to fifteen hundred dollars last night, and are currently trading at about a grand. Unfortunately, the cost to claim and swap them is exorbitantly high right now, as gas pices are still well over 600 gwei.

It’s apparent that this trend will continue with Ethereum for the near future, as gas prices continue to rise, forcing small player out of the market. After all, what’s the use of trying to move around <$1000 amounts of ETH or other tokens if you’re paying $100 in gas for the privilege. That said, it will be likely that Ethereum will wind up being the chain for large financial operations, with other, smaller projects being forced off to side chains or competing projects.

With that in mind, I spent some time earlier today doing some research into Polkadot, looking at toward running a validator node, or even doing some smart contract coding on it as well. It’s an interesting project, but the cost of running a validator node and learning Rust will have to go on the backlog for now.

For today, I’m just watching equities markets get crushed and considering whether to buy some more ETHE. It’s holding steady today while everything else tanks, and I don’t have enough that I need to worry about setting stops on my position yet. The premium is sitting at this level, so I may

Crypto markets are mostly green. Haven is back up today, so I’m swapping out to xUSD a bit at a time. I’m still watching CELO, although I don’t have any capital free right now to grab any.

So for now, I’m stuck with transactions in mempool, so I’ll just wait a couple days, and hopefully things will calm down enough for me to get my funds moved into Yearn.

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At the top of the diving board

DeFi is completely insane and massively complex.

I’m about to load up the yEarn valut with some wrapped BTC, and am planning on staking about twenty percent of assets under management. This is almost insanely risky, but I believe that of all the projects in DeFi, the one I’m picking carries the least amount of risk.

We’re putting our faith in several assumptions.

  • The wBTC protocol is secure, and that the BTC that we put in there will be safe when we decide to withdraw.
  • The Curve protocol is secure, and that the smart contracts are safe. Of course, there’s a ton of assumptions nested here as well, including the other tokens in the pool, renBTC and sBTC.
  • That the Yearn valut is secure, and that they know what the hell they’re doing.

Anyways, I must be insane.

I’ve got two out of three withdrawals out of BlockFi. I decided to use exchange funds instead of paying their thirty dollar fee to make another withdrawal. (I burned my freebie on a test tx.) I put in an order to convert BTC to wBTC, and that took all night to trade at an even price. After that completed I put in a text tx to my Etherum address, and then sent a max withdrawal after that cleared.

Now that those funds are sitting safely in my wallet, I have to choose whether to go ahead and proceed with loading the vault, or if I want to convert the rest of my BTC first. I think that’s wise. I feel like quibbling over the gas fee is probably stupid considering the size of the position here, but every bit will count in the long run.

If this works out, assuming that everything is safe and that my deposit grows at the respectable forty percent that I think it will, this could be one of the most significant, life changing decisions that I’ve made since getting involved with crypto.

We’ll give it three months and see.

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Tuesday notes

Of course my BNB position got stopped out while I slept. Of course.

I’m going to feel bad if this moons again, but I had too much of my trading stack bottled up in his one position. Most all of it is in BTC now, about eight percent is in $ALGO, $SOL, $ZEN and $ZRX.

Haven Protocol ($XHV) is up again, marking an eight on the TD Sequential. I got my node synced up again, and am probably going to convert funds to the “offshore” XUSD vault if things take off again tomorrow.

The only thing in my screeners that are forming a buy right now is $CELO

The project came up on my radar a few days ago, although I haven’t done much research. They’re centered around providing banking services to anyone with a smartphone, which is admirable and they’re still in testnet, which seems like an interesting opportunity to run a validator node on the cheap. There doesn’t seem to be much information about how much stake is required, and there seems to be some sort of validator election that occurs to promote full nodes to validators.

The only thing stopping me from putting in an order right now is the fact that the only exchange I have access to is Bittrex, and I’m not trying to move any funds right now. If I did, I’d probably move them into the Yearn sBTC vault.

Speaking of which, I am expecting my BlockFi withdrawals today and tomorrow, which will be going in the vault.

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Evening notes

Trade plan programming

I’ve been working on my trade planning Python module the last couple days, and already the project is becoming rather complex. I say it’s a trade plan module, but really it’s a capital preservation ‘brake’, if you will.

The basic idea behind the module is like this:

  • Get balance list and filter empty ones.
  • Get last symbol/BTC market price.
  • Calculate total BTC value of all holdings.
  • Get open orders for each market. For each, look for limit orders, and calculate the covered/uncovered amount in BTC.
  • Make sure that no uncovered position accounts for more than two percent of total portfolio value, and that no more than six percent of the portfolio value is uncovered. If they are, do not allow any additional buys.

The last couple days I’ve been slowly working through everything, following a strict TDD methodology to make sure the code is covered, monkeypatching and mocking calls and creating fixtures for the exchange data. Now I’m getting to the point where I don’t know how to proceed, and I’m getting frustrated.

I don’t know where the problem arises in times like these, but I have a feeling it comes from lack of proper planning. I start out with a few procedural calls, then I get to a certain point of complexity where I have to start refactoring classes. Or I don’t know what to do next, and so I cobble come code together without writing a unit test first, and start breaking my flow.

All I can do at times like this is take a break.

Binance token mooning

Binance token has been on a bit of a tear the last few days. Apparently they’ve launched their own EVM compatible Binance Smart Chain, and are hoping to go after the DeFi space. Good luck to them.

I took a look at the validator instructions earlier to price out the cost of being one. It costs 10,000 BNB tokens, or about 300 BTC ($3 million), and about $244/month in AWS costs. That’s still a magnitude cheaper than running a $30 million Serum DEX node, but shows the type of centralization that we’re going to be seeing with these projects. I’ll keep running my puny IDEX node, and work toward my 32 ETH so I can run a Ethereum 2.0 node.

I’ve actually been holding my BNB tokens for two years, and they just actually touched my cost basis after spending so much time underwater. Since I’m actually trying to follow my capital preservation rules, I’ve had to put a tight stop on this latest run. I’ll have to figure out how to account for entry cost in my trade plan program, as now I’m just looking at the percentage of total. This may not work well when things start mooning and I have to recalculate on the run-up.

Jumping into the DeFi deep-end

I’ve decided that the opportunity cost for keeping my funds in BlockFi is just too great, and I’ve initiated some withdrawals. I’ll be putting the entirety of the funds set aside for my kids into the sBTC vault later this week, for a modest 40% APY. I must have stared at the withdrawal screen for five minutes before I could push the submit button. I must have read the wallet address over and over three or four times to make sure they were right.

It’s stressful, being your own bank.

Anyways, I’ve still made no decision on my cold storage funds. I’m risking way more than two percent on this vault, and any more would be irresponsible.

Famous last words.

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Getting ideas

I spent some time coding Friday night, trying to update my trade plan script. It’s been a long time since I used it, and it doesn’t work anymore since it relied on the CoinmarketCap API to do lookups. So I’m starting from scratch.

Using the CCXT Python module to get my estimated balances off the exchanges is a bit more difficult than I had imagined. I can get the balances themselves, and then have to do some conversions using the last trade price in BTC. That’s a far as I got earlier. The next step is to do map limit orders against the positions to determine capital at risk, then I can start working on the trade plans themselves. I want the module to refuse to purchase if more than six percent of funds are at risk.

I’ve also decided to start moving funds from BlockFi over to Yearn’s sBTC vault. I did a test transaction last week, and I think it’s trustworthy enough to start moving things over. I still want to take a look at the contract code and see if I can make any sense of it, and there’s one other thing I need to figure out first.

I’ve allocated funds to my kids, and are holding some funds for my family members. I want to pool all these funds together, since moving funds in and out of the vaults takes a good amount of gas, and I want to minimize this as much as possible. Basically I’ll be farming USDC and BTC via the yCRV and sBTC vauts on yEarn, respectively, I just need to figure out how to track the amounts of assets from each individual.

I haven’t thought too much about this yet, but my preliminary idea is that I can use some sort of token to track contributions. Tokens will be minted or burned depending on how much someone contributes to the pool. But how to send those pooled funds to where they need to go?

I’m assuming that the yEarn vaults themselves use some sort of strategy contract to control what happens each time someone contributes. But in this case, I want to be able to control the funds myself. It seems, though, that funds would come in, I deploy them, and voila! But no. It’s going to be more complicated than that.

If I’m managing funds for four or five individuals, I’ll still have to manage wallets for each of them. I don’t think that this can be done with a simple spreadsheet, it’ll have to be tracked in a database of some type. Maybe I could build my own local contract to track it. We’ll see.

I’ll be looking over the Zapper and yEarn docs to see how I can interact with their contracts directly. I don’t necessarily want my contract to be on mainnet right now cause of gas transactions, this is why off-chain and side-chain projects were created in the first place, yes? Maybe I’m overthinking this.

I would need pools for each type of asset, so it could be a one-for-one token exchange. Tracking the value of the vault is where I’m stuck. I’m not sure how Zapper does it, so I have some more research to do.

While I think about all this, I’m also busy getting my Haven node spun back up. The vault is implemented, so it looks like I can move out of XHV into USD without involving an exchange. This will allow me some bit of trade leverage without having to deal with Bittrex for now. It just looks like it’s going to take a week for my node to sync up.

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Week end report.

Today was a quiet day.

There wasn’t a lot of activity today. The markets were relatively flat, and I didn’t do much besides my day job. Most interesting part of that was doing some more work on setting up the environment for the Texas Instruments DSP compiler, which is part of my CI/CD pipeline project. I’ve still got a lot of work to do there, but professionally speaking, I’m not certain how much effort I want to spend on that given developments in fintech.

I finished recovering my Monero wallets and moved my funds to a light wallet, then it was on to repeating the process with Haven, which has been mooning the past few days. Unfortunately, the precompiled Linux executable won’t run on Ubuntu 18 because of GNU Library incompatibilities, and the Docker build failed also. I’m not sure how much time I want to devote to getting that together right now, given that I have to KYC with Bittrex to trade any of it.

My mining tracker needs some serious rework, since half of the pricing APIs are broken so I have to manually update everything. I should work on it tonight but I’d rather play video games. Priorities. Seriously though I may have to work on something tonight. I’ve got lots of work I want to do with the CCXT library and trade plans, so I might as well just bite the bullet and get started with it.

No trades or other on-chain activity. I’m leaning wrapping some BTC and sending it into the Yearn vault, but I’ll probably give it a few more days first while I work on other things.

Patience.

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DeFi notes

I did quite a bit of reading today, I’ll share a few things I picked up relating to crypto and DeFi. I’m still trying to wrap my mind around it enough to the point where I can write a couple thousand words on it for my Substack, but for right now I still feel like I’m in the research phase.

DeFi is crypto’s latest craze, and it may soon challenge traditional banks – A good primer about DeFi and what’s going on in the traditional monetary systems.

Bitcoin of DeFi – about Yearn.Finance, covers the various sections of it as well as some of the background on it. Andre Cronje started it for his family and friends and codified it and released it to the public. Brilliant.

The Revolution You’ve Been Awaiting: Fintech + DeFi – Alternate title: “Software Robots and Automated Workflows”. Interesting read.

Guy Makes $250,000 a Day Yield Farming on Ethereum – Yes, but he started with $8.1 million ETH. I did take a look at the portfolio on Debank. $8m in Sushi swap, $4m in Swerve, and less in Compound and Balancer. Might pick up some SWRV just in case. Apparently I’m inadvertently staking there through Harvest USDC pool.

3 Rules for Healthy Pseudonymous Hygiene with Ethereum – With all this activity going on I’ve caught myself slipping a bit with my activities. I inadvertently shared a ETH tx with someone yesterday while I was depositing into Yearn yesterday, and now I consider that address burned, so to speak. I’ve got to be careful not to cross streams, so to speak, if I’m going to keep things clean.

And speaking of privacy…

The IRS is Offering $625,000 to Crack Monero – You bet they are. I’ve dealt with Cryptonote quite a bit, and it’s built on some solid math. Privacy tokens are the real thing, and Monero’s probably the oldest and most popular. I don’t see this happening anytime soon.

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Getting serious about crypto yields

I’m a degen now.

I finally took the plunge, after a couple of test runs with Yearn, Sushi, and Harvest, and finally dumped a significant amount of capital into yield farming. Bankless published an excellent guide that I read this morning, and since the yETH pool is still closed, I decided to dump my stash of USDC tokens into Curve’s sBTC pool, and then staked it on Yearn where it’s now gaining upwards of forty percent ROI. We shall see.

The entire process was relatively painless considering the stress I went through with my previous forays. Zapper made the process even more so. It did most of the heavy lifting to get my Curve tokens, then I just had to stake them on Yearn, which was another step. And the gas used was only about half of what I was expecting, so yay.

Time will tell how long this DeFi madness can go on. I’ll probably take a breather for a bit and watch what happens. This feels like a pretty big step but I don’t want to go crazy right off the bat. I’m still reading through Mastering Ethereum, and it’s obvious that I’ve got a long ways to go toward understanding how all this stuff works, so I’ll just take it easy and get into it the same way I did with crypto: slowly.

There’s a first mover/early bird advantage to these markets, but I shouldn’t expect to keep getting lucky. Capital preservation is the name of the game. I’ve been so focused on it lately, and have been very aggressive with my equities positions. In addition to Overstock last week, I also had Tesla and NVidia stop out on me this week, so I’ve got a lot of cash available in my retirement account that I can deploy on more speculative bets. (Like I haven’t dumped enough on mining companies already…)

I’m continuing my value average program, but have also put stops on some of the ones that are running hot. Take profits. Hopefully that won’t come back to bite me if we actually get inflation. I’m just waiting for a broader pullback.

I’m keeping an eye on the ETHE premium. I’ve opened a small position, set some stink bids, and will scale in as I can while protecting my capital. The last week or has seen some crazy runs, I swear I must have gone up thirty percent and down fifteen in the last month. It’s insane.

If I’m going to make a living out of this then I need to keep calm and remember how to protect my positions. My equities trades are tax-exempt, but my crypto gains are going to be taxed like hell if I make any big moves. So far I’ve avoided liability, since my trades have been at a loss, and I haven’t opened any positions that have required stops yet. We’ll just wait for the market, buy low and ride it high.

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No rest on Labor Day

Today is the first day of school for Elder, and one that will be entirely online. She’s got afternoon sessions, which means that Younger will be looking to me as a playmate. I don’t think I’ll be getting much, if any work done at all. We’re lucky she got the afternoon spot though, cause the eight to noon spot would be even worse.

Yesterday morning I produced a Labor Day Breakfast for the local political party. It was in Zoom, and they called me about three days out to put it together. I managed to use OBS as a virtual camera, and was able to queue up a half dozen videos in OBS so that we weren’t struggling with it using Zoom’s sharing capabilities. I just set the scene in OBS, put the spotlight on my video stream and hit transition. Voila!

It went really well, but was really harrowing. There was probably close to two dozen speakers, including our Senator, several Representatives, as well as numerous state officials. I managed to keep it on track, except for some of the speeches. By the end I was playing people off, Improv-style. The whole thing was about two hours. One attendee remarked that it was the best-run Zoom meeting that they ever saw. There was over one hundred people on it at one point.

Then as soon as I was done with that I had to get ready for a pool party, which meant I had to run to the grocery store for last-minute shopping. I only picked up a few things, but the store was crowded. As soon as I got back Missus loaded the kids up and we went to pick up her mom and headed off to the party.

I didn’t get to enjoy it for long.

About an hour after we got there, I got a message from a political committee member that the website had been “hacked”. I pulled it up and was met with the bare directory listing for the WordPress site. Index.php was missing, so my first thought was that it was a failed upgrade. I tried to pull up my management console on my phone to restore a backup, but the most recent one was months old. Oops. So much for relaxing.

I’m not going to get into the details of the hack or the recovery, I think this was a simple case of credentials being leaked. There were too many people that had access to it, and the committee secretary was given the site admin credentials to use to post on the page. Yikes!

I cleared that situation up with them and urged everyone to check their antivirus. One of the committee chairs was running a Mac with nothing but Malwarebytes on it. I swear. I locked the site down as much as I could with free versions of Securi and Ninja Scanner, so I think things are cool for now. This is the second time this site has been hacked though, so I’ll have to keep an eye on it.

I just checked the login attempts on the site, two attempts from Rio De Janeiro overnight.