Finding neutrality

This is either a galaxy brain move or is going to get me rekt:

I’m trying to find a way to generate some income for myself. Since it looks like the market could go either way right now, I’ve been looking for a way to generate yield in a market neutral way. Traditionally, one would do this by buying one asset and shorting it at the same time while capturing the spread. Vesper’s vVSP pool has a quite insane APY, so I wanted to see if I could capture enough off of this to cover living expenses, and decided last night to try a position for a week. So I staked my Yearn Iron Bank position as collateral on CREAM and borrowed VSP, which I then staked on Vesper. The borrow APY is quite ridiculous as well, but if my math is right, I should net a couple hundred dollars this week.

It’s not quite enough to live off of, but it should open doors for other similar strategies if it pays off. Since my collateral is in stablecoins, my main risk is that the price of my borrowed asset appreciates and puts my collateralization ratio at risk. Due to the current VSP issuance rate, I don’t believe it’s at risk for some sort of pump. Regardless I think reduce my risk by restaking the VSP back into CREAM, but I’m really not sure about the secondary effects of that. It might put me in a position where I’m stuck and might need additional collateral to rotate out.

My plan is to let this ride for a week, remove some of the staked vVSP, swap some of the VSP to USDC and use the rest to pay back the interest on the debt. Gas costs will be a factor, as will changes to the VSP APY and CREAM lending rates. If it works, I’ll be able to generate cash flow and not be concerned if the price of VSP continues to drop.

When VSP’s emissions rate dies down enough that it’s no longer providing me with enough incentive, I can try other pools. CREAM has a huge number of assets available to borrow, I just need to figure out the best opportunities for them and figure out where to go. UNI is only 3.55% to borrow right now, and I could stake that on Impermax for 57% currently. That’s probably more risk than I’m willing to take on, given that protocol’s only a few weeks old.

I’ll have to look at some other platforms as well to try and figure out other ways I can generate some yield while staying market neutral. Since I’m mostly in stables, ETH and wBTC, I’m sort of in a bind, since returns on ETH/wBTC are pretty lousy across the board, and borrow rates on stables are already pretty high. All told, I’m not sure that this is a viable long-term strategy, but I’ll continue to investigate. I just don’t think I’ve got enough capital to make it work unless I am willing to put a lot of my eggs in one basket. It may be to risky a strategy to pursue.

DeFi level up

Trade notes: Pickle, Perp and CREAM

I was pretty busy yesterday, as I got the latest tranche of funds transferred from my brokerage TradFi IRA over to my AltoIRA and onto Kraken. Tracking my portfolio to my original plan was very difficult, due to the various wallets, chains and apps that I’m using to track it. My original plan was to do a 40/40/20 BED portfolio, (BTC, ETH, DPI,) but it’s changed a bit. The current portfolio looks a bit like this:

BTC16.75%Native BTC
wBTC18.25%also includes BTC2x-FLI-wBTC SLP
ETH31.00%also includes ETH2x-FLI
DPI/BDI7.50%Staked BDI, BASK
ALCX6.50%Staked alUSD, ALCX and ALCX-ETH SLP
Solana8.50%SOL, SOL-RAY and STEP-USDC LP
USD stables5.00%
Other6.50%BAL, RUNE, others, Star Atlas NFTs

I can’t actually seem to get the total value of the other category to calculate correctly, leading to a margin of error around five thousand dollars. It made trading a little bit difficult, since I wasn’t quite sure how to balance what I was doing. So I’m sitting on about seven percent more cash than I want to right now, and was not sure exactly how to proceed, so I made a few trades into ETH and wBTC, sent some USDC to Solana, and decided to look at some other things.

I’m not quite sure what brought me to it, but the V1 Yearn 3crv vault is migrating to the V2 version and is not earning boost, so it needed to be moved. I decided to pull it entirely and move it to the native USDC vault, which is getting a higher yield right now. I came out a bit ahead, thankfully, but only a trivial amount. I’ll have a full report on the reFIREment fund in June.

I did start poking around the other Yearn vaults while I was there, and contemplated the yvBOOST vaults. It basically holds yveCRV tokens, which go into a one-way vault, and earn 3crv tokens in return. The BOOST vault compounds these of course, but there’s another one that interested me was the one that deposited it as yvBOOST-ETH SLP on Pickle.Finance. The first time I looked at it a few weeks ago I couldn’t wrap my head around it, but this time it clicked. I’ll explain, with a slightly different example. I’m holding ALCX-ETH SLP, which I have staked on Alchemix for more ALCX rewards. I unstaked my SLP from there and deposited it on Pickle, where the jar, or vault, follows a basic auto-compounding strategy. This turns my 250% APY into a 500% position. On top of that, I can stake this resulting pSLP, as it’s called, for an additional 10% APY in PICKLE tokens.

I also spent a lot of time on Perp.fi yesterday. I’ve been trying to wrap my head around perpetual contracts for some time, but have been somewhat limited as a US-citizen. I’ve done some basic leverage trading on Kraken, but found the experience to be a bit lacking. FTX.us has some leveraged products available, but using margin with my IRA triggers a taxable event, and I haven’t done KYC with my regular account yet. Perpetual Finance, while still geo-locked for those of us in the US, is available 100% on-chain. Better yet, it’s trade engine is on xDAI, which means it’s very cheap to use.

Even better, funding rates are negative, meaning that shorts pay long. So I can basically get paid to take a long position. Everything’s done through USDC, and I already had some wETH and wBTC on xDAI, so I liquidated some of my position and opened longs using the proceeds as collateral. So I’m sitting on a couple of 5x positions, that won’t get liquidated unless we have a further market correction that takes us lower than this week’s lows. In the meantime, I’ll get a little bit of funding from the spread.

I’m really impressed with the Perpetual team. Their docs are put together nicely, and their code repos have some nice treats, including a CLI client (!) and an FTX/Perp arbitrage bot, which is nice. They have their own token, which receives some of the trading fees, but I haven’t decided whether to take a position on that. The main use case seems to be for taking short positions, as this video shows. Taking a market-neutral position to facilitate high interest yield farming really opens some doors.

Perp is limited to a few trading pairs, mostly BTC, ETH and a few DeFi blue chips. One really important note in the video is how you can use CREAM’s bigger selection of tokens to short the other side. I clicked with me, and opened up the door to another piece of the yield farming puzzle. I’ve got plenty of tokens and LP I can use as collateral in CREAM and borrow some of the low interest rate tokens, such as DPI, and, which I can lend to Impermax; or VSP, which is 25% to borrow, but yields 125% in the Vesper vault. There’s obviously some liquidation risk, but it is something I’m going to be taking a further look at in the coming days.

Blood in the streets

The crypto bloodbath continues today, with ETH breaching $3000 and BTC $40k. Suddenly my 2x FLI positions aren’t looking to shabby. The market is a complete mess, everything is a sea of red. Still, I have a transfer from my brokerage IRA that is almost complete and should be on exchanges either today or tomorrow, so I will be ready to do somme discount shopping. Still, I could not have picked a worse time to retire. My goodness.

I’ve started working on Solana in earnest, working my way through the tutorials for Anchor, their deployment framework. I have got to get multisig working, as SAIADao has raised over $58,000, and I’ve got close to nine grand in a soft wallet that only I control. Setting it up seems a pretty straightforward procedure, it’s just a program, but it’s using it that I’ve yet to figure out. I have no idea how to interact with Serum via command line, so that’s going to be something new for me to figure out.

Since SAIADao has done so well, I’m moving the timetable up to start purchasing posters in about two weeks. We’ve got more than enough to cover the Star Atlas: Rebirth Tier 3 posters six through eight and have plenty left over. Still, I’ve been making mistakes with some of the proposals, sponsoring some before I verify the wallet transactions, and I even let one through today for five grand that had the parameters mixed up. Thankfully someone caught it, but now we’ve got to vote it down so that it can be redone. It’s a bit of a mess, but I should be able to step back a bit and let others do it.

I’m having trouble bringing myself to work on … work. I had a meeting yesterday with the St. Louis crew that I forgot between my morning call and 1PM. By that time I was doing school work with Younger and didn’t check my work computer until almost three. There’s a lot of other things that I seemed to be missing as well. I just got seven more days to go, but I have absolutely no motivation to do anything at all. There’s too much else going on in my life that has a higher priority. For example, I haven’t been able to get in touch with my dad for several days, last I talked to him was the day after his second surgery. Just put that on the to-do list, I guess.

Someone turned me on to this new game called Core. It’s a very cool concept, it’s like Roblox in that you can build your own games with it, but it’s built on the Epic Games platform, so I assume it uses Unreal engine. It’s got an editor that’s very similar to Unity and Roblox, but the main difference is the number of game assets that are made available by default. There are even frameworks for dungeon crawlers and capture-the-flag games, I was very impressed with it. There’s also a central hub that players can hang out in, and jump into portals which take them to the games. They load very fast, and the entire process of jumping from game to game is very seamless.

Of course I wanted Elder to check it out with me. She’s of course more interested in playing the games than building them. Core is geared at an older teen or adult audience, so I don’t know if I’m pushing her too hard, but I’m hoping we can find something to work on together, but I’m not sure if it’s going to take. I’m going to start her with Galileo in a couple weeks, so we’ll see what she takes after then.

I’m hoping that I’ll be able to spend a lot of time with the kids over the summer. Working from home while trying to be Mr. Mom has been really stressful for all of us, mainly as they have no boundaries when it comes to interrupting me when I’m on the phone. I’m sure there’s something to be said about my lack of balance in the past, but that’s all about to change dramatically in a few more days.

Battle of the memes

CPI inflation beat all estimates; Vitalik rugs SHIB and other meme coins; Elon dumps Bitcoin over “dirty power”, bitcoiners fight back.

I don’t have much insight on these inflation figures but am just throwing them here for informational purposes. We’ve known asset inflation was already here, as I discussed yesterday, but I did not see this change in the CPI coming so fast, nor did I expect it to hit four percent already. Most of the macro people I follow have been anticipating this for some time, the question is where do we go from here. Bullish BTC.

So Vitalik Buterin, the founder of Ethereum, gets lots of airdrops. Apparently token creators do it as some sort of social proof, as they can later say that “Vitalik is an investor in our project”. This happens to Mark Cuban as well as any high profile whale address like the 0x_01b address or whatever it is. So that’s how Vitalik wound up owning about $8 billion dollars in SHIB. These dumbasses decided to drop him Uniswap LP tokens instead of just locking them up in a timelock like most people. Vitalik’s been in a very tough conundrum, a trolley problem, as one person described it. Holding the token was bullish for SHIB, and could lead to more nonsense. Selling it would hurt a lot of people. Damned no matter what he did.

The final straw was several days of network congestion on Ethereum, as gas prices remained in the 300-400 for several days. Most of the traffic was SHIIB, as well as several other clones that sprung up. Even Binance chain was affected and required people to increase gas. So VB did what he had to do, and dumped it. All of them.

You should really look at the thread above . He removed the LP, then started dumping and donating coins to charity. SHIB, AKITA, and ELON were all either dumped or given to charities including Gitcoin and a COVID relief fund for India. One person pointed out that he sent the meme coins to the charities, while keeping the ETH for himself. What this means is that he was able to deduct the full value of the meme tokens as a charitable contribution, even though the charities would in no way be able to redeem the tokens for that value. There’s just not enough liquidity or depth to the market.

This seemed to trigger a minor pullback in the price of ETH, but that was nothing compared to what was about to happen. Queue memelord Elon Musk:

This caused a huge dump in the BTC price from $54-46k in a matter of hours as billions of leveraged traders were liquidated. Much of it was quickly bought up, and it’s recovered to the 49.6k level as I write this. Many were quick to point out that anyone with enough BTC to actually buy a Tesla were unlikely to spend it on one, so Elon wasn’t shooting himself in the foot here. There was also speculation that Elon may have been pressured by bitcoin critics on the environmental front, and that he doesn’t really believe the Tesla statement personally. This article provides some additional context.

The Bitcoin community is taking this accusation as a call to arms. For months, there has been misinformation about bitcoin’s environmental impact being circulated, and this Tesla tweet is the last straw for many. Many believe that bitcoin production actually creates more demand for renewable production as well as the capture of waste energy. Many bitcoin farms rely on hydroelectric, and there are companies that are capturing waste methane from gas mining rigs, which would normally be vented out into the atmosphere, to power bitcoin mining equipment. Bitcoin mining can also smooth out troughs in power demand, coming online when demand is low and shutting down when it goes back up.

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Via Crypto_Rand, Twittter

Of course that’s not to say that some bitcoin production relies on fossil fuel. The Tesla statement is apparently referencing a Chinese coal plant shutdown last month that was accompanied by a significant drop in the bitcoin hashrate, which was apparently due to the fact that hydroelectric power supplies had caused many Chinese miners to shutdown and relocate following the rainy season.

Bitcoin is an easy target for many due to the fact that the hashrate is available directly on chain. While critics like to bemoan the fact that the bitcoin network uses more power than most small countries, it’s not a fair comparison. No one talks about the current environmental impact of gold mining production, or the combined cost of paper currency production by every nation on earth. Those figures aren’t as easy to come by. Thankfully, Ark Invest has done the math for us.

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Source: Ark Invest

Of course for many bitcoiners, the cost of the fiat monetary system is way worse than the environmental impact of bitcoin. If we are returning to four percent inflation, or higher, then people are going to witness firsthand the damaging effects of wealth destruction, as peoples’ savings are destroyed by rising prices. The next few days will likely see bitcoin’s energy usage at the front of debate, and hopefully this time it can be put to rest.

As the world burns

Thoughts on Weimar, meme coins and the end of bullshit jobs

So ETH broke $4200 as the world has lost its mind over meme coins. SHIB is some multi-billion dollar token now, and new competitors are springing up left and right. Gas on ETH is the lowest I’ve seen in days, 180 gwei as I write this, but I still have yet to make any moves on mainnet in roughly a week. It’s just too expensive. My OpenSea listings remain untouched, and likely won’t fill since it’s just too damn expensive to do anything.

I think we go up from here. Sell pressure on ETH is likely to be non-existent for some time, given all of the staking options that are happening. Bankless has gone into this whole ultra-sound money thesis a bunch so I’ll not repeat it here, but Cochran’s tweet below is likely correct. NGU technology indeed. And I love that he lumps his investments into EVM-compatible and Solana. Confirmation bias indeed.

My thesis for this cycle has been that ETH would outperform BTC. When ETH hit $2000 I put a good amount of my retirement portfolio ETH into the ETH 2x FLI token, at $123. Today it’s at $420, and I’m sitting pretty. I’ll likely hold this position until ETH breaks this line, then I’ll consider scaling it back a bit.

Messari’s Ryan Selkis made a comment a while back that we’re likely to see a lot of “idiots” making more money than us this cycle, and he cautioned that it was OK and not to follow the FOMO. There’s plenty of money to be made this cycle, one just needs to keep their cool, follow their plan, and execute. There’s just so many people flowing into crypto this time round, there’s no telling how crazy things can get from here.

One thing that does have me concerned is the broader casino quality that’s going on now. I don’t know how much of the broader population is entering the space right now, but I think we might be in for trouble long term if we start minting millionaires left and right. I don’t know how many low-wage workers are winning the lotto with Doge and SHIB and all these other meme coins, but I hate to see the fallback once this bubble busts. I remember the feeling of anxiety and excitement that I felt during the 2017 run as I watched my four figures become size, but I also remember the anxiety and doubt that occured as the market corrected eighty percent over following six months.

There’s been a bit of fear-mongering among some conservative and libertarian media about people making more money on unemployment benefits and stimulus than they would make working at most jobs, and we know we’ve been facing a skilled labor shortage here in the US for some time. A good number of my clients over the years have been struggling to find skilled labor. HVAC techs are just one example I can think of. Now I’m seeing reports on social media of fast food restaurants closing down with signs taped to the intercoms that “no one wants to work here” or “people don’t show up for the jobs they signed up for”.

And I can attest that certain types of tech roles are hard to fill these days. Take mine for example. I’m basically forfeiting my position to work for daos or protocols or yield farming or whatever the hell I’m going to call it. Is this the future of work? Is the rise of SHIB and meme tokens going to spawn an exodus from productive labor? in the past I’ve pushed back against the idea that stimulus and UBI would lead to the mass exodus of labor from the market, at least a detrimental one. Sure a lot of bullshit jobs are going to be really hard to fill moving forward. No one wants to work for a minimum wage job when it takes three or four hours of labor to feed a family of four from the same restaurant.

After reading When Money Dies I’ve got a few doubts. So much of what that book describes in 1920’s Germany seemed oddly familiar to me when I was reading it, and each day that goes by seems to be like deja vu. The rush to speculative assets for example, the realization that it’s not the assets themselves that are going up in value, but that our money itself is losing value. In this case it’s not just the dollar, but all fiat currencies that are losing value against Bitcoin and other cryptoassets. We’ve already seen asset inflation in stocks and the housing market; used cars experienced a bubble last summer as stocks of new cars fell off due to factory closures; the price of lumber is still exorbitantly high due to home-improvement and new construction demand. Now, as the economy returns post-COVID, we’re seeing the beginnings of a bubble in energy stocks as demand meets a year of underproduction. Not to mention the shutdown of the Colonial Pipeline due to a ransomware attack that has led to gas station shortages.

We are in the beginning of the euphoria phase of this bull cycle, I would say. One recurring theme from When Money Dies stands out to me, it was that through the multi-year collapse of the mark in Weimar, things kept getting worse in an unending catastrophe, again and again and again. Crypto, with its charts and cycles, might be giving us a better view of exactly what’s going on. As the market cap of these coins go parabolic, we can always wonder when the pullback will begin, when the correction will come.

What if it doesn’t?

Exit or Escape?

ETH broke $4000 early this morning, and with gas at 250-300 gwei, it has become painfully apparent how difficult it is going to be to continue to operate on Mainnet for the coming months. Yesterday a simple ERC20 transfer was about $180 in gas, and I’m pretty much putting a hold on all ETH activities unless I carefully consider exactly what I’m doing.

Everything under $400 in value is effectively dust for now. We may see some relief briefly once Optimism launches, but I think long term, if ETH is going to $5000-10,000, it’s going to price most participants out of the market. I’m almost there myself. I’m trying to triage my positions into several buckets.

  • Dust: shitcoins I bought as a crapshoot, that have no real value to justify swapping them back to ETH. I’m not sure what I can do to deal with the tax ramifications of this. I can’t merely mark them “abandoned” unless I burn them or the private keys for the wallet. The latter is unacceptable for a variety of reasons, I’m not sure what else can be done about this loss. It will need further research.
  • AMM only coins: Coins that are worth a couple hundred bucks, but don’t have any liquidity off-chain. I’ve got a couple things I can do here. One, if I believe in the project I can just hold on, which is the most risky option, or I can swap close the trade and take ETH/stablecoin profits. Alternatively, I could bridge them to a sidechain, Polygon, BSC, or Polygon. This might not be as expensive as an AMM trade, but it also depends on liquidity as well.
  • Majors: Most of the blue chips have plenty of options for trading, so it might make most sense to move these coins to Kraken or one of the other centralized exchanges. L2s are also an option, but migration is a bit more expensive than just an ERC20 transfer. It all depends on how comfortable I am with custodial risk. There are a couple ways to reduce cross-chain transfers fees. FTX has free transfers to Solana, and Binance can do the same for BEP20 tokens. It seems kind of ironic to set up to sell ETH on Solana, but no more so than doing wBTC on Ethereum.

Then there’s the whole what to do with my yield farms. Obviously, harvesting is going to slow down a lot, and there’s a lot of yields that aren’t going to be worth the gas to claim. I’m going to be thinking very hard about what I do in the coming months. And moving into new positions… well, that’s going to be a very hard decision to make.

I think there’s probably one project that I’m even remotely considering getting into. OlympusDAO seems almost too good to be true, like Alchemix, so I’m going to wait for an opportunity for gas to come down and then throw some funds into it.

Basically I’m looking for things that I’ll be comfortable staying in for the next three months. Or longer. I don’t know how the Ethereum community is going to deal with the prospect of five-figure ETH, and what that might mean for the network. If it’s going to continue to be the type of network that can run a node on a laptop, then they’re not going to be able to increase the blocksize too much bigger than they have now. Still, I’m not able to make a prediction as to what the long term effects on gas is going to be. Optimism and the upcoming EIP may reduce short-term gas issues, but if ETH continues to climb, then Ethereum will continue to price people out of the market, forcing participants onto side chains.

Uniswap V3

Launch notes and other updates

I procrastinated writing this morning’s post as I didn’t know what I was going to do today, and it seems like it was a good idea because today was Uniswap V3 launch day. And it was a bit of a mess. The main problem came down to the same EIP-712 signature issue with Metamask and hardware wallets. You just couldn’t use the V2->V3 migrator, as it relied on a signature to approve the conversion. Opps. The entire Uniswap Discord was full of people with LP tokens on their hardware wallets that they couldn’t migrate! Myself included. I wound up moving my UNI/ETH LP over to my Metamask softwallet address and migrating it there. It’s not safe, so I’m moving it back to my hardware wallet right after I finish posting this.

I had some other tokens on my Lattice1, and ran into the same problem, even though they had just pushed out EIP-712 support a few days ago. There was a slight problem with the Metamask plugin that the team was able to patch, and I was able to confirm it right away. This means that the Lattice is currently the only hardware wallet on the market that supports this important signature scheme.

I’m a bit miffed by Uniswap’s lack of communication on this lack of hardware wallet support in their migration process. They must have known about it, but just decided not to mention it on their docs? Granted, it is the fault of Metamask and the hardware wallet providers that this hasn’t been fixed in the last several months, but Uniswap could have at least given people a heads up.

The migration is expensive, it cost me $150-160 for the two I did, and you have to know what you’re doing. You can’t just use the old zero-to-infinity LP provisioning that underlied Uni-V2, you actually have to look at a chart and figure out what sort of range you want to do. With my UNI/ETH LP, I opted for this range, which I figure should good for a while.

As long as the price stays in this range, I’ll be providing LP, if it moves out, I’ll have either 100% ETH or 100% UNI. This is a lot different from the impermanent loss that we’ve become used to. If the price drops to the bottom of my range, my position is all UNI. If it goes higher, it’s all ETH. This is a much different risk model that what we’re used to.

The other big thing here is the collect fees button. Before, fees were rolled up into the protocol directly into the LP, but now it’s a separate button that can be claimed separately. I’m not quite sure what the design decision was behind this, but it seems curious. I suppose one could just wait until they remove liquidity, hopefully the fees will roll out with it, but I can’t see myself using that feature too often. Not until when Optimism launches and it won’t cost me $40 to claim it.

This is an interesting system, and it’s going to be interesting to see how things play out in the coming weeks. Liquidity mining is going to be very interesting to watch, to see how teams who have been relying on V2 LP tokens deal with these new NTFs. It’s going to require a completely different paradigm for project launches. Staking contracts will have to be re-written completely. So far, it doesn’t look like anyone has tried to provide V3 liquidity for Klondike’s kBTC/wBTC pairs, but I wonder if it would be possible to provide concentrated liquidity on V3 that would essentially absorb all of the fees on V2. Perhaps. There does seem to be some arbitrage opportunities between the V2 and V3 pools now, but I’m not likely to have time to mess around much with that for now.


Other updates: The SAIA Dao continues to grow, we’re getting a constant stream of contributors, and it’s become a lot of work to keep pushing these proposals through. I’m trying to get people to help me a bit, as it’s taking a lot of time to flush these proposals through every day. I’ll probably just shift down the amount of time I check them, and just stick to sponsoring and enacting them.

I aped into the Step.Finance token on Raydium today, right before it dumped — of course. The APY is ridiculously high and I haven’t lost 2% yet so I’m going to hold and compound these rewards daily. It is quite ridiculous right now, even if it is only supposed to continue for a few weeks. Step basically wants to be the Zapper of Solana, and it could be very lucrative.

My Impermax IMX/ETH leverage is still sitting pretty. 1.8x or so, even though I need to check it right after this. I’m wondering what Uni V3 is going to do to the V2 fees. It may destroy their entire operating model. We’ll know more after we have some volume data. This may be a very dangerous position to hold right now, but I’m playing with airdrop money so I’m not really concerned. Might wind it down if gas costs come down. We’ll see.

Bankless has a DAO! I’m really looking forward to this, and am considering a small stake.

The World Computer launches on Friday. After several years, of development, Dfinity is going live. I have not been paying enough attention to this one over the years. I took a look over some docs earlier, but I don’t want to distract myself from the work I’m doing in Rust right now, but I’m going to listen to the launch event and maybe buy some tokens. They’re apparently only going to be on Coinbase Pro, which may limit my options. We’ll see.

Uniswap LP collateralized leverage with Impermax

So I’ve been somewhat occupied with a new lending protocol for the last day or so. It’s called Impermax, and it allows one to use Uniswap liquidity tokens as collateral for a leveraged position. You can also supply one or two of the borrowed assets in each pool for a nice APY, with no risk of impermanent loss. I’m just testing it out after getting an airdrop, and it advertises as the first DeFi protocol that allows you to use LP tokens as collateral.

A few of the APYs available on Impermax (4/3/21)

I read the whitepaper last night, it was written last year, and has a lot of math detailing the liquidation system. The system seems pretty well put together. There’s a core system, that holds all of the user state, and upgradable proxy contracts for the rest of the implementation. This design also allows for third parties to interact with the core system as well, meaning that it could be put to use in third-party protocols at some point.

Each Uniswap LP token gets its own pool, so a liquidation in one pool does not affect the others. For each pool there are three smart contracts, the LP collateral contract, and one each for the components of that LP, borrow A and borrow B. Lenders can provide either of borrow A and B, or both, and borrowers deposit LP tokens, and leverage their position by borrowing both tokens and staking on Uniswap. Here’s what it looks like after I took my IMX airdrop and opened a 5x long last night.

You’ll noticed the liquidation prices, there are two, representing an upper and lower band. The reason for this is that if the ratio of token A to token B gets out of whack, then impermanent loss can make it difficult to repay the loan. Here’s a chart of the band a couple hours after I opened my position last night.

Now there still seems to be some problems with the system, especially with regard to the liquidations. I got liquidated on the above position, which clearly shouldn’t have happened. I was only playing with a small stack and lost a small portion of my LP collateral, so it wasn’t too bad. Generally speaking, you want a leverage position that you won’t have to actively manage. The USDT/USDC pool seems like an obvious play here.

Borrowing is expensive, and is supposed to be offset by farming emissions via the IMX token, but there appear to be some issues with whether this is actually working properly right now. Supplying assets seems very lucrative, and it’s taking every bit of self control I have right now to keep from staking every single stablecoin, ETH and wBTC token that I have into the pools right now. And since the asset in each pair is in a separate contract, you can provide both assets and earn yield without worrying about IL.

On the topic of security, the protocol has several audits available, but with TVL only at $20 million right now, I’m not sure that IMX has been battle tested enough to warrant anything more than a small position, but I’m definitely looking at allocating some C tranche funds from the BCM reFIREment fund. In all, I’m very excited about Impermax’s potential. It’s got some kinks and improvements that need to be made, but it’s appears to be very lucrative for anyone willing to ape into it. Managing a leveraged position can be costly, but yield farming seems like a no-brainer.

NFT Flip

Today marks the end of the week 1 Star Atlas NFT sale, and I’ve been trying to figure out what sort of plan I’m going to put in place. I spent some time this morning trying to figure out how many I would have to sell in order to flip my way up the ladder. I calculated what it would take if I was able to get 200% and 150% of the original purchase price. This is if I wanted to have two of the fourteenth poster, one I could sell.

The game theory on this one is hard to work out. We’ve got both Solana and Ethereum mainnets, and no way to bridge assets from one to the other — yet. I assume the Star Atlas bridge will be one-way, but haven’t confirmed that yet. They also haven’t launched the market yet, so OpenSea is the only real place to sell them at this time.

If I hold to my risk profile, I’ve got enough funds to buy a dozen of the first three posters, but that doesn’t account for gas costs to manage the sale, or bridge costs if I eventually have to send them over to Solana and put them to use. It’s a risk, and I’m not sure quite what I’m going to do yet.

There have been a few thousand posters sold on the Solana marketplace, but only a hundred or so on OpenSea. I think Opensea is more likely to appeal to people who are interested in the NFTs so much more than the in-game items. And the starting cost for fourteen posters is only $900, so I think I may go ahead and move forward with that now and see what I can do.

SAIA Dao launch

We are truly living in the future

Well, I feel pretty good about things. I managed to summon SAIA Dao last night with fifty members. I may have padded that with one or two friends without their permission just to make that a nice round number, but anyways. I don’t even know how many hours I spent on the proposal itself, trying to get people on board, and just shilling the hell out of it in the official SA channel, but I think it’s going to work out OK.

I decided on a proposal velocity of twenty-four, since that will allow us to process new member requests and tribute proposals (dao funding) at a pretty quick pace over the next few weeks. Voting periods are five days and grace periods are two. I made one small flub, and didn’t notice that the primary token is not xDAI, but wrapped xDIA. Wrapping it is pretty easy to do via WrapEth, so it’s just a minor annoyance.

DaoHaus has a number of boosts available, including a Discourse subtopic, which will save some money to start with and allow us to break out some of the formal discussions out of Discord. The Discourse server is configured with cryptoauth.io, which allows one to login using their Ethereum address or an NFT. I had not previously heard of cryptoauth, but seems like an awesome project that replaces OAuth and uses ethmail.cc (another awesome service that I’d never heard of).

These type of services, using NFTs and Eth addresses for authentication, really open up some interesting possibilities. Star Atlas is using NFTs for their game system, we already knew that ships and loot would be tokens, but a look at their Genesis rewards indicates that they may be used as some sort of credentialing system for rank.

This brings up some interesting scenarios for guild management. Services like Collab.Land allow you to create token-permissioned chats in Discord using ERC20, 721s, or POAP tokens. It can basically allow server roles based on tokens in your wallet. Completely fascinating.

And if that wasn’t completely bonkers enough for you, here’s an NFT Discord Bot that allows you to mint an NFT by uploading a file to Discord. You can create multiple copies, send them to other Discord IDs and move them to mainnet. It runs on a sidechain called webaverse, which is a “virtual world built with NFTs”. These possibilities are incredible.

As far as the xDAI chain goes, it looks like the most developed project out there for creating NFTs is Cargo, which has pretty slick project management and token creation tools available. I messed around with it a bit last night, but didn’t really get around to doing to much with it, but you can embed audio, video, 3D files within the NFT as publicly available files, or lock private ones that are only accessible to the owner.

Basically, to sum up a pretty winding post, we could use Cargo to mint membership or rank NFTs for the Interstellar Alliance members, and use them as keys to unlock access to forums or provide other permissions within Discord or other applications. This type of stuff is part of a broader conversation that’s been going on with identity and web3 that’s pretty cutting edge.

If we are going to build truly permissionless, decentralized systems, then we’re going to need new identity services that don’t rely on Gmail, or Facebook, or even our state-mandated IDs.