Darshan Vaidya retweetledi
On Lotus, lenders earn yield even when no one is borrowing.
We’ve integrated @WisdomTreePrime’s tokenized money market fund into the reserve framework for LotusUSD.
A new model for DeFi lending: productive debt.
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Darshan Vaidya
1.2K posts
Darshan Vaidya
@darshanvaidya
trying to solve interesting problems | ex-founder of Credora | ex Mako, UBS
Katılım Ağustos 2009
1.5K Takip Edilen1K Takipçiler
It’s maddening to me this is becoming normal in DeFi. Arbitrating this all after the fact is crazy, not sustainable, and drains confidence from users.
Aave@aave
Update on rsETH incident: @LlamaRisk has published a report outlining the rsETH incident, the immediate actions taken, its impact on Aave, and potential paths forward. All service providers have been working to assess the two potential bad debt scenarios on the Aave protocol. Aave DAO service providers are also leading an effort with ecosystem participants to address any bad debt. This effort already has several indicative commitments from various parties and we are grateful for the strong support we have received so far. We will share further updates as we have them. In the meantime, the full report can be read here: governance.aave.com/t/rseth-incide…
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Darshan Vaidya retweetledi
BTC Options Public Beta is now live
Options complete the core trading suite (spot, perps, and options) and bring a key building block for advanced portfolio construction to Paradex.
Start trading here: app.paradex.trade/options/BTC
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Darshan Vaidya retweetledi
Introducing Railnet Talks, a new podcast series spotlighting the asset managers and builders shaping onchain finance.
🎙️ For our first episode, @laszlo__szabo and @darshanvaidya sat down with @ShiliangTang, Managing Partner at @monarq_mgmt, to talk about Bitcoin yield, the convergence of TradFi and DeFi, and what institutional onchain asset management looks like in practice.
@monarq_mgmt is one of the first institutional asset managers to go live on Railnet with a Bitcoin yield strategy. Worth a listen.
👉 Watch it now: youtu.be/oF7XAvLyLrg
YouTube
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@ImperiumPaper It’s been a while, so perhaps it’s evolved/out of date info, but @creditcoop_xyz built programmatic repayment rails for credit lines, where repayment was built into the revenue streams (like salary based lending). Not the same as alerts, but using SCs for what they’re good at!
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Most consumer and much commercial lending is structured as a stream of payments - either interest only or amortizing. When you miss a payment this serves as default, regardless of collateral.
I’ve yet to see much in DeFi structured around using periodic payments to flag distress. Does anyone have an example of this that they’ve seen?
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@R3NSMAN @flipdazed That makes sense! A really interesting framing, thanks!
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Fair point. The lender does hold an option too: they can withdraw at any time.
But the two options are not symmetric. The lender's withdrawal depends on available pool liquidity, meaning the portion of deposits that has not been borrowed out. At 100% utilization there is no free liquidity and the lender cannot withdraw at all until borrowers repay or new deposits enter.
So the lender is short options that get exercised under stress, and long an option that disappears under the same conditions. The net position is still asymmetric against the lender.
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Not many people have realised but DeFi lending is an exotic interest rate option ...
(i) American-style prepayment option from utilisation-driven interest rates, and
(ii) limited-liability option equivalent to a call on collateral value
DeFi lenders are correspondingly short both prepayment and default optionality
... this is how I'm thinking about it rn anyway
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Can someone ELI5; why would anyone lend vs wstUSR with a fixed rate oracle at a 96% lltv vs hold it outright? There’s no access issue for USR, so is it solely because Morpho vaults (v1) don’t allow for that? Really, what’s the why for being on the other side of this loop?
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Ie better and more intelligent oracles, and better access to the underlying - so you don’t have to be the lowest paid capital in the stack with the most risk and almost no legal claim 6/6
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Think a reasonable interim solution if you really can’t find a hybrid or dynamic oracle that works is that the curator absorbs the first X% by default in hardcoded markets, given they underwrote it to suggest it didn’t need one. Longer term, just fix the problems at hand; 5/6
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I don’t often disagree with OP, but I think my position here has shifted to the point where I don’t see the point in lending vs an asset with a hardcoded oracle. USR *was* diligenced pretty well, @CredoraNetwork gives it a pretty poor-average rating, largely on Lindy related 1/6
PaperImperium@ImperiumPaper
I’ve written plenty on it in the past so won’t spend an essay on it today, but when it comes to stablecoins (including those for ETH or other reference assets), hard-coded oracles are brittle. They work until they catastrophically don’t. In contrast, live oracles allow for real-time risk mitigation, but at the cost of punishing users for false positives if liquidity dries up. Both are a legitimate design choice, but need to follow different underwriting processes. Only hard code if you diligence the underlying asset and are confident in its ability to meet redemptions as designed. Both the technical and financial fundamentals must be solid, and assign a risk premium to rates or haircut to LTV as appropriate. Live oracles let you be relatively agnostic about the quality of the asset (beyond technical safety of the smart contracts) and stay focused on the liquidity availability. Let’s also remember that more complex oracle setups are also possible. I personally have advocated for stablecoins to have a hard code when n liquidity is viable in a redemption contract and then switch to market price oracles the moment liquidity falls below n. Ultimately, this is surfacing again a longstanding “credit migration” problem where DeFi relies on curators and risk consultants to manually flag when an asset goes from excellent to good to fair to poor as collateral. That’s far too slow in cases like USR, even if it was 100% accurate. DeFi automates, speeds up, and simplifies (even if it sometimes seems otherwise) finance compared to traditional alternatives. We’re ultimately building financial vending machines, and it’s just a fact that it’s really hard to make a machine that works as intended under all conditions. But there’s clear ways to improve on both oracle design and oracle use, and it’s disappointing to see slow innovation on that front.
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Darshan Vaidya retweetledi
A missing primitive in DeFi lending: productive debt.
Productive debt makes idle capital productive, gives lenders a base rate even at low utilization, and compresses spreads for lower borrowing costs.
lotuslabs.net/blog/productiv…
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@kapursanat Better to die doing your actual mandate than die doing a bunch of things that definitely weren't the job (VCs don't give you money to be a fund manager).
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there isn't a single crypto company (or startup in general) that lived or died based on whether they generated 5% extra yield from their treasury
in traditional startups, people get this, but crypto people are always trying to tell startups to optimize yield - awful advice
Ben Harvey@0xbenharvey
We surveyed/analysed 25 crypto treasuries and found: - 93% of capital sits idle - 7% AUM is income-generating - Existing management hasn't caught up with available strategies Report w/ @safe and @dl_research out tomorrow Insights from @BaptisteCota of @MidasRWA, and @eshita
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cue the Aave floor brokers pic
Googly 👀@0xG00gly
Someone lost $50M swapping USDT for AAVE, I guess via Cowswap on the Aave frontend? My thoughts and prayers go out to wallet 0x98B9.
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