Alex McFarlane

Will be talking about Interest Rate Models in DeFi later today and whether this solves the Linear Kink problems x.com/i/spaces/1yKAP…

@newmichwill you're doing pretty well on stats!

Interesting

@0xbrighty sure - I studied physics with your seedify buddy Marios

@flipdazed Interesting stuff mate, also do some quant and data modeling. Are you open to chat sometime?

Will be talking about Interest Rate Models in DeFi later today and whether this solves the Linear Kink problems x.com/i/spaces/1yKAP…

@AJoshua777 There's definitely some Alice in Wonderland reference in there the oysters and the walrus

@flipdazed filth? xD nah that's the parts i skip i'm the shrimp at the buffet — lobsters do the cooking, i just pick the best dishes 😄

@leviathan_news @CryptoBakeneko @CurveCap @euler_mab don't krakens eat lobsters ?

@CryptoBakeneko @flipdazed @CurveCap @euler_mab 🗺️ Land ho The Leviathan harbor watch has this drop under glass. 🧭 Sent to the crew for review: leviathannews.xyz/redirect/21184… 🏴‍☠️ Earn $SQUID by surfacing news: leviathannews.substack.com/p/faq

I think this mixes a few topics but it's got some merit. However, I don't think it means Morpho and others are ill-suited. Just that there are things to be aware of. 1) The fixed params of Morpho markets This is a valid concern because regime switching is definitely a thing. cVaR models change over time and so by definition a curator will either have a badly modelled market after some time. Does it mean that Morpho isn't suited to RWAs, no I think that's an incorrect read. Does it present natural friction in Morpho to growth, yes. 2) Agree with the liquidator incentives as you state them but the framing needs adjustment for real world The thing you're forgetting is spreads and roles. Separate liquidators from OTC buyers. The liquidators get paid a Morpho default fee for liquidations but the OTC buyers will factor a spread into their models. Typically you won't get as good a price for selling on day 89 as day 1 to redemption. That isn't related to the liquidation premium. The liquidation premium is just the payment to the broker of the deal. NB: I also don't know where you get the liquidation premiums from tbh. I've probably done something wrong but back-solving your equations but when I used continuous discounting methodology I got different numbers.

Why Morpho Isn't a Great Fit for RWAs. Morpho is designed around the deployment of immutable markets. A market is defined by its loan token, collateral token, price oracle, and risk parameters; the interest rate model, LTV, and liquidation discount (inferred from the LTV). This is great from a lender's perspective. When you deploy capital to a market, you know exactly what you're lending against and that the terms won't change. But the fundamental problem with this design is that it assumes risk is static, when risk is very much dynamic. What do I mean by this? As a lender, when you deploy capital to a market you have a holistic view of the current world state. You might deploy to a market offering a 91.5% LTV (which infers a 2.62% liquidation discount) where the collateral has plenty of on-chain liquidity available for liquidators. But what happens when that on-chain liquidity starts to disappear? The risk profile of the market has changed, but the parameters haven't. Morpho's solution is to deploy a new market with updated risk parameters that better capture the shift in the external environment. In practice, it's not that simple. If liquidity in the original market is currently being borrowed, borrowers are unlikely to voluntarily migrate their positions to a new market with a lower LTV and a higher liquidation discount. This becomes even more precarious with RWAs, which carry a fundamentally different risk profile from spot tokens. Liquidators go from taking on price risk to taking on duration risk. Let's look at a concrete example. Take the Anemoy Tokenized Apollo Diversified Credit Fund (ACRDX) and assume we deploy a market with an 86.5% LTV, that equates to roughly a 4.22% liquidation discount. ACRDX has quarterly liquidity, so to keep things simple, assume redemptions only occur on the 1st of every quarter. If a position is liquidated on day 1 of a new cycle, the 4.22% discount is probably sufficient to cover the duration risk and opportunity cost of waiting 90 days for the liquidator's redemption to settle. But if the position is liquidated on day 89, the same 4.22% is far more punitive as the liquidator only has to bear one day of duration risk for the same reward. This creates a perverse incentive. Liquidators are encouraged to wait as long as possible before seizing a position, since the longer they delay, the better their risk-adjusted return on the liquidation becomes. By design, this heightens the probability of bad debt accumulating in the market. Risk modelling in a lending market needs to be dynamic. It needs to respond to the specific characteristics of the collateral it's modelling, not treat every asset class as if it carries the same static risk profile. What's good for spot tokens isn't necessarily good for RWA's.

tldr; we think it's good - putting into audit now with @threesigmaxyz

@roinevirta the best thing about an NFT. It's operationally impossible to go to precisely 0 🙃

@flipdazed NFT holders, yet again, wrecked

@Walter_Su11ivan @DanielxKilleen yes do tell!!!

@DanielxKilleen @flipdazed Do you have a thread on what things you exposed?

@FlamaTech_Labs 🦞🦞🦞🦞🦞🦞🦞🦞

@flipdazed 🦞🦞🦞🦞

@flipdazed jesus christ

@keoneHD Literally it's just because @ivangbi_ and his team are so aggressive on the mutes and ban hammers so all credit to them

@flipdazed Good stuff. LobsterDAO is unique, crazy that it is open while retaining signal

@Kristian_Kho I had to google "schizoposting" lol. If I hear voices I'll let you know for sure !

@flipdazed Love your stuff, Alex. I mostly lurk in there cuz the conversations are too big brained for me. Your schizoposting in the group taught me alot of stuff tho especially on the tradfi side of things.

@AJoshua777 Does that mean you're a shrimp? Feeding on the filth from the seafloor that the lobsters leave and turning it into energy 😃

@flipdazed And then there's folks like me that live in the background and absorb that's perpetually online just reading everything useful in there 😁

@xlb0369 that's funny because I literally did physics to not have to write any essays

@flipdazed writing style got me hooked, nice

@CurveCap @euler_mab @leviathan_news yess! leviathan in there!

@flipdazed @euler_mab Get me in @leviathan_news

@chainyoda Bahaha poor 🇫🇷

France has surrendered to both sides

@kataansqueue @LeadingReport This is just physics because the scattering amplitude on average is different when the sun is lower in the sky

@LeadingReport Clear blue skies all day but as the sun sets they aggressively spray the sky. You see the sunlight reflecting off of whatever it is, and looks kinda like a rainbow. Am I alone in this observation?

Declassified CIA files reveal that, under President Lyndon B. Johnson, the military sprayed chemicals from planes, also known as SAIs (stratospheric aerosol injections) to modify the weather, per Daily Mail.

@iholdspot Sold

@flipdazed Investing at 6 likes and 30 views. 💹

Yeild will stay the bitch of tradfi until BTC volatility gets below 15% Once vol moves into G10 ccy range (<12%) then BTC will become a genuine contender for settlement. Once vol moves into sub 10% it competes with USD and will displace USD as an FX base pair. At that point DeFi will go parabolic.