Cross-chain protocols provide critical infrastructure for Web3, but are the most vulnerable to attacks. The good news?


@chainlink CCIP is much closer than we think. Here's all you need to know 🧵

For starters this thread will assume a fair level of familiarity with blockchain interoperability. If you're looking to get into the weeds, I go in-depth in my previous thread 👇 https://twitter.com/pt1mfv_/status/1679859728695054338?s=20

Cross-chain protocols have proven to be critical infrastructure for blockchain ecosystems. And yet, this technology is vulnerable at best.

With the latest @MultichainOrg hack,  bridges are now responsible for $2.66 TVH (total value hacked) to date.


Developers, institutions, and retail users alike need to be able to bridge assets and transfer data across chains in a secure, cost-efficient, and easy-to-use manner.

Today we explore how @chainlink aims to solve this problem.

First, a quick refresher on Chainlink for those unfamiliar.

Blockchain Oracles connect blockchains to external data sources, and enable smart contracts to execute onchain using inputs provided off-chain. Many existing oracles rely on a single entity to deliver data ....

... introducing a critical single point of failure. This has lead to numerous attacks in DeFi, including the @mangomarkets exploit 🥭

Chainlink is a Decentralized Oracle Network; a collective of oracles which retrieve, aggregate, and deliver validated data to smart contracts.

Cross-chain

Cross-chain protocols emerged to meet the needs of the multi-chain world, where heterogenous chains could not natively communicate with chains in other ecosystems and networks.

Unfortunately, these protocols have lost a LOT of money through attacks and exploits.

Introducing the Cross-Chain Interoperability Protocol (CCIP) from @chainlink

It is ultimately intended to be a “global, open-source standard” for cross-chain communication.

An easy way to think of it is a TCP/IP standard for blockchains.


At its core, CCIP enables a sender on a source chain to send a message to a receiver on a destination chain.

Its core capabilities are arbitrary messaging, token transfers, and programmable token transfers.

Let’s take a look at how it all works 🔎

Evidently, there are many moving parts involved in a CCIP transaction lifecycle. The core principle is that a sender on a source chain can successfully send a message/token to a receiver on the destination chain.


Here's what a (simplified) step by step process looks like.

Let's break down the individual components below...

DONs 👥

A network of multiple oracles working together in a decentralized manner. In the CCIP, there is a a Committing DON and an Executing DON - they each have individual responsibilities in ensuring the finality and authenticity of the transaction.

Routers 🖥️

Users interact with the CCIP via Routers. Routers are smart contracts which provide an interface for users to interact with - it is simply our ‘front-end’ in this case. Similar to Endpoints on @LayerZero_Labs , every chain has one unique Router.

Onramp/Offramp 🛫 🛬

Smart contracts in the CCIP architecture which validate the transaction instructions prior to sending/receiving the message. The onramp is responsible for validating transaction data, the offramp is responsible for ensuring the txn's authentic delivery.

Token Pools 🏊

A token pool is an ‘abstraction layer’ which facilitates the specific instruction 'lock/burn' > 'unlock/mint' mechanism of the asset included in the transaction. The neat thing about TPs is that token issuers can set a cap, or rating, on asset transfers via CCIP.

ARM 💪 🔐

The crème de la crème of the CCIP , the Active Risk Management is a network of independent nodes responsible for monitoring the system for any malicious activity. Without going into detail, the ARM is ultimately acting as a “secondary validation service” for the CCIP.

Now let's talk fees  💲💲

CCIP uses a gas-locked fee payment mechanism (“Smart Execution”) to ensure the reliable execution of cross-chain transactions - anyone using CCIP only pays gas on the source chain.

This model for CCIP was intended to reduce friction for users and allow for scalability; therefore CCIP will support gas payments in $LINK and in alternative assets, such as native blockchain gas coins and their ERC20 wrapped versions.

Now let's talk security ⚔️

It’s not a secret that security is by far the most important feature in cross-chain protocols. CCIP is certainly security-centric - there are multiple layers involved in preventing malicious activity.

For starters, Chainlink is already a decentralized network of oracles, greatly reducing a single point of failure scenario in an oracle attack.

Second, CCIP utilizes Chainlink’s Off-Chain-Reporting (OCR) protocol - a P2P network of nodes aggregating price feeds for oracles.

And lastly, the CCIP introduces the ARM , an additional layer of security in which a network of independent nodes oversee and monitor the entire transaction processing lifecycle for malicious activity.

Security is the core strength of CCIP, in my opinion.

Why is CCIP important?

Cross-chain interoperability continues to be a crucial yet painful part of the evolving Web3 landscape. It is not going away any time soon, but the need for secure solutions is greater than ever.


The vision for CCIP, as with most cross-chain protocols these days, is to enable a suite of cross-chain applications and functions which were not previously possible, such as cross chain lending, cross chain governance, and even cross-chain solutions for enterprise chains

There is some speculation around $LINK and the CCIP, considering gas is paid for in $LINK and not $ETH. While additional utility for LINK is always needed/welcomed,  I wouldn’t anticipate any major price action from the launch of CCIP itself.

Closing Thoughts 💭


TLDR; I believe CCIP presents a unique, multi-layer security approach to cross-chain interoperability - I don’t think it will be the end-all solution, however, nor do I think that should be the goal.

Chainlink's biggest advantage is its Network Effects™️ ..

Chainlink currently boasts $8,010,052,517,053 in total value enabled (!!) , home to over 1,800 projects in its ecosystem, and has partnered with the SWIFT bank messaging system, among others.

Most people in crypto have either heard of Chainlink or been an indirect beneficiary.

This may give Chainlink an advantage for the adoption of the CCIP, particularly among institutions and larger players who value security first and foremost, even if at the cost of slower performance. Which brings me to another point...

CCIP may be slow 🐢

Though it is quite impressive to consider the layers of security involved in the transaction lifecycle on CCIP, I believe all the steps may create some  friction and affect the speed and performance of the protocol overall.

Security is important, but retail loves speed.

Nonetheless, I believe CCIP will be critical infrastructure for developers and users who wish to prioritize security for cross-chain interaction.

Given Chainlink’s history and adoption, many developers, institutions, and retail users may trust the CCIP over other bridges.

Alpha 💎

CCIP is (kinda) already here! The CCIP explorer is already live: https://ccip.chain.link/

https://twitter.com/chainlink/status/1680970793331613697?s=20

Cross-chain Liquidity 💧

@synthetix_io is building its Synth Teleporter on top of CCIP , allowing users to transfer Synth liquidity across different chains via a burn-and-mint mechanism.

For ex; you can transfer snxUSD from Ethereum > Optimism already

(can take up to 30 mins!)

Cross-chain Governance 🏛️

Aave is already integrating the CCIP as its cross-chain governance solution. The goal is to use CCIP to create a more secure and cost-efficient mechanism for its cross-chain governance.

A visual:

As my buddy @DAdvisoor hinted at, would Uniswap consider Chainlink’s CCIP if Aave and other bluechip protocols continue to adopt it?

https://twitter.com/DAdvisoor/status/1681070386014744576?s=20

Cross-chain Enterprise & Capital Markets

Chainlink has already partnered with SWIFT, a global messaging standard for banks - now with CCIP, enterprises are expected to be able to connect and interoperate across any public or private blockchain environment directly.

And that’s a wrap! This paper is meant to be a primer on CCIP , not an all-out guide. Keep in mind some concepts were simplified for the sake of our attention spans. If you wanna dig deep, read the docs 🧠

Full version here for the long form enjoyooors https://paultimofeev.substack.com/p/going-cross-chain-with-ccip

Bullish CCIP or nah?

@8771link @platos_son @schizoxbt @chilla_ct @OvrCldJonny @arndxt_xo  @0xsurferboy @thelearningpill @jake_pahor @0xMughal @0xSalazar @Louround_  @CryptoKoryo @2lambro @DeFiMinty @Slappjakke @_FabianHD  @francescoweb3 @CryptMoose_ @rektdiomedes


Going Cross-Chain with CCIP

The Evolution of Interoperability; A mega 🧵

"Multi-chain? Cross-chain? OMNICHAIN? Wtf" 👇

We live in a multi-chain world. The difference in DeFi market share between chains, approx. 3 years apart is indicative of this.

For context on how we got here first, I suggest reading the full version 👇
https://paultimofeev.substack.com/p/the-evolution-of-blockchain-interoperability


Interoperability, by definition is the “ability for a system to work with or use the parts or equipment of another system”. Consider the different parts of a computer working together to run in unison, and all those computers communicating with each other via Internet.


This concept is directly applied to blockchains, where interoperability refers to the ability for chains to communicate with other chains.

Specifically, the ability to transfer data from one smart contract on the source chain, to another smart contract on the destination chain.

Whether it is better performance, cheaper fees, or better yields; users will continue to travel across different chains in order to meet their specific needs. No matter which way you put it, blockchain interoperability is important.

First stop; multi-chain.

TLDR is that the multi-chain world was born out of demand for solutions to Ethereum , which was being overloaded with demand, causing slower processing times and higher fees.

Multi-chain is simple. Multi = many, multi-chain = many chains.

Multi-chain refers to a world of independent blockchain networks, which provide a shared set of fundamental design and security properties to connect many chains.

This is like how residents of different cities in a nation share the same benefits from their Federal jurisdiction.

Multi-chain ecosystems can be classified into 3 distinct models: “Hub and Spoke” models, Layer 1, and Layer 2 protocols.

The Hub-and-spoke model is a network architecture where a central hub connects a number of smaller entities called spokes.

Cosmos first implemented this through Zones - independent chains with a shared consensus engine (Tendermint) and communication protocol (IBC).

Another example would be Polkadot ; a network which uses a relay chain (the central hub) to connect many Parachains.

While these models are recognized for their strong security and modular frameworks, there is often too much friction in the onboarding process for scalability.

Layer 1: EVM Chains

The Ethereum Virtual Machine (EVM) enables chains to achieve interoperability with Ethereum, and can transfer assets between one another and operate under the EVM multi-chain ecosystem.
Notable examples include the Binance Smart Chain, Avalanche, and Fantom.

Layer 1: Beyond EVM

Blockchains like Solana were built to push the multi-chain ecosystem beyond the EVM. Solana introduced its own consensus, programming language, native gas token,  - the true "Alt L1"

Recent events indicate that Solana isn't going away any time soon 👀

Layer 2

Layer 2s are chains built on top of Layer 1s, like Ethereum.
These are scaling solutions which 'inherit' the security guarantees of the underlying network while “decongesting” traffic on the main network.


While growth on L2s exploded in the last year, they are often criticized for being too centralized in design, usually relying on a sequencer operated by a centralized entity to process transactions.

My buddy @563defi wrote a great piece about this https://www.bankless.com/will-rollups-decentralize

Thus far, the rise of the multi-chain ecosystem reflected web3’s inherent need for higher throughput and cheaper transaction fees among crypto users.
For many teams, deploying their dApps on multiple chains become an almost necessary strategic decision to capture more users.

The isolation of chains in multi-chain ecosystems created a security assurance; an exploit on network A will not affect chains on network B.

And yet, this state of interoperability was far from perfect. As with any new innovation, the multi-chain ecosystem created new problems in place of the ones it solved.
Chains on Cosmos, Polkadot, EVM, even Solana - could not communicate with one another natively.

This created additional overhead for teams going multi-chain, for users who wanted to explore different networks, and it fragmented liquidity.

This also created a feedback loop - if a chain had high TVL, users would flock to trade there, and likewise avoid chains with lower TVL.

The fact is that heterogenous chains in a multi-chain world cannot natively communicate with other.
This is where cross-chain interoperability comes in.

Cross-chain communication protocols emerged to solve the biggest shortcoming of the multi-chain world; communication!


Cross-chain interoperability refers to the exchange of data, whether it be tokens, messages, arbitrary data, or smart contract calls, from source chain A to destination chain B.

More specifically, it concerns communication between non-native chains.

a super simple way to think about this is how you can have the same video game supported on multiple platforms (PS4, XBOX, PC, ). You and your friends play the same game on your own device, but can't play online together because you need a solution to communicate cross-platform.

This is how you can think of cross-chain interoperability- a platform to unite the users of different chains and networks.

How does it work?

Cross-chain solutions involve two critical steps:

1.  validating the state of the source blockchain
2.  relaying the data to the destination blockchain


Cross-chain smart contracts means a dApp can exist in a single form , and be deployed across different smart contracts, chains, and networks.


Technically, all cross-chain protocols can be defined as bridges. In the “real world”, bridges are structures which connect one geographic location to another to enable easier transport between them. Blockchain bridges do this for, well, blockchains.

The biggest factor of these bridges is where the trust lies. Scalability is great, but it often comes at the cost of security and performance.

An easy way to think about trust in the context of chains is : “Who is verifying the system and how much does it take to corrupt them?"

Contrary to popular belief, blockchains are not entirely decentralized databases running purely on code and vibes - each chain has a set of validators who verify, validate, and execute transactions on the back-end of the chain.

Therefore, when using a chain, you are in fact trusting the chain’s validators. Bridges, which are built to offload the difficulty of deploying unique code across different chains for teams, also rely on, or “trust”, validators.

Trusted bridge : A bridge which  “trusts” a third-party to facilitate the transfer of assets and other data across chains, usually an intermediary chain with a small set of validators. These are usually faster by design, but at the cost of security and additional trust.

Trustless bridge: A bridge which relies on the validators of the source and destination chains to transfer data and value between one another, without additional parties involved beyond the underlying chains' validators.

These are designed to be more secure bridges, albeit at the cost of slower performance. Perhaps “trust-minimized” would be a more appropriate way to describe this model.



I could go on a whole tangent about bridges, but that’s for a different paper. Generally speaking, however, this bridging 101 cheat sheet from the gigabrains at Li.Fi http://li.fi/ has a ton of useful resources.


Cross-chain interoperability is controversial. It seems like a natural progression for blockchain; enabling chains across different networks to communicate with one another. Less fragmented liquidity, less overhead for developers, users don’t need 20+ wallets and accounts, etc

Unfortunately, sometimes innovation creates more problems than it solves.

As the multi-chain environment exploded, the need for bridges grew congruently. Bridge volume spiked as people flocked to transfer assets across chains they couldn’t previously use, and TVL soared too.

Bridges are vulnerable. Any protocol which involves "locking" assets in a smart contract is vulnerable.

Bridge hacks made up 64% of all total funds stolen in DeFi in 2022.  include Nomad ($190m), Ronin ($615m!), and Wormhole ($326m).


The @MultichainOrg hack is another example demonstrating that we are not quite there yet. Cross-chain is risky.

And yet, as Tascha once pointed out, people didn’t really stop bridging after these incidents in 2022 - a telling sign that perhaps bridges, though they are immature, do in fact have their place in DeFi.
https://twitter.com/TaschaLabs/status/1522290080798322688?s=20

While daily volume across Bridges has rarely passed $1b in the past 9 months, it hasn’t totally declined either and remains constant.

Cross-chain interoperability is a work in progress. While asset transfers have been and remain the most popular use of bridges, generalized messaging bridges enable applications to expand the possibilities of cross-chain functionality.

This is because they enable the transfer of arbitrary data beyond tokens, opening up possibilities for new innovation such as cross-chain governance, cross-chain lending markets, multi-chain yield strategies, etc.

But trade-offs are to be made.Remember it’s always important to consider where the trust assumption in a bridge lies - who is verifying the system and how costly is it for them to exploit it?

And now, we've explored how the multi-chain world works, how cross-chain solutions work, and the flaws with each of them.

What if we lived in a world where *all* chains were connected by smart contracts and cross-chain communication was actually simple (and secure)?


This is supposedly the idea behind "omnichain".  Now, it’s too early to tell if omnichain is a legit concept or just a fancy word for better multi-chain.
If we use latin prefixes to imply the meaning:

multi = many
omni = all

Just how practical is it to connect *all* chains??


This been debated for some time now

https://twitter.com/Fiskantes/status/1511328524635942918?s=20

I ran a poll on this which only demonstrated the uncertainty around how "real" omnichain is.

https://twitter.com/pt1mfv_/status/1678488611501535250?s=20

Still, seamless blockchain interoperability, where users can zip and zag across chains in one-click, is the natural end goal. Circle is making this bet as they try to push native USDC across as many chains as possible.

Let’s be real; native assets > wrapped assets.


Regardless of what you think about "omnichain", @LayerZero_Labs and many others have embraced it. I only wish them the best of luck as I believe it represents the right idea. Perhaps I have my reservations given how first-gen xchain communication protocols have been rekt.



Conclusion 💭

To wrap up what we learned today;

- the multi-chain world was born to provide alternatives to Ethereum’s high fees and slow performance
- multi-chain interoperability was innovative but limited, as chains could not communicate with other network chains natively.

- cross-chain communication protocols, known as Bridges, emerged to meet this demand, and gained significant popularity at first.
- Bridges created new attack vectors, and remain the targets of the largest exploits in DeFi to date demonstrating that cross-chain tech is....

still immature and needs development. Nonetheless, people still use bridges because there is a natural need for them in the space. Whether or not omnichain will be the solution, it represents a natural progression of the tech IMO.

Many people, including Vitalik Buterin, believe that the isolation of networks in a multi-chain world still outweighs the security risks posed by cross-chain bridges. First-gen cross-chain protocols have demonstrated to be a high target of risk.

https://twitter.com/VitalikButerin/status/1479501366192132099/photo/1

The demand for bridges, however, demonstrates that most users don’t really care - if you need to bridge you need to bridge.

So the solution comes down to a multi-chain environment with minimal cross-chain friction. It’s time to move away from trust-centric models like Lock and Mint bridges, and pay closer attention to ‘neutral’ models like generalized messaging bridges which can be used to....

... transfer data beyond token transfers and actually expand the usecases for interoperability.

When it comes to adoption, applications which can interact across chains on the backend, keep everything smooth for users on the front end, are winners.


Interoperability teaches us that individual parts are most useful when they come together to form a greater whole. Different blockchains have their own strengths and weaknesses, but they need to be able to easily communicate and interact with one another.

Interoperability is a work in progress, as the issue of trust is still at the heart of cross-chain solutions. The Multichain hack has demonstrated we still have a ways to go.

But we’ve taken our first steps, let’s build on the lessons we learned.

Ahh I'm taggingggg


@rektdiomedes @schizoxbt @chilla_ct @OvrCldJonny @arndxt_xo  @0xsurferboy @thelearningpill @jake_pahor @0xMughal @0xSalazar @Louround_  @CryptoKoryo @0xCrypto_doctor  @2lambro @DeFiMinty @Slappjakke @_FabianHD  @DAdvisoor @francescoweb3

The Evolution of Interoperability in Blockchain

Betting on the stability of pegged assets is a unique way to earn profits in DeFi.


What's new in @y2kfinance V2 and why I'm bullish 🧵

For a quick refresher, Y2K is an exotic risk market for pegged assets, such as stablecoins, LSDs, and more.

You can think of their core product "Earthquake" vaults as CAT bonds for DeFi.

Get up to speed if you're unfamiliar👇
https://twitter.com/pt1mfv_/status/1643365935104012291?s=20

Their vision is to build a comprehensive product stack for anyone seeking exposure to the performance of these pegged assets.

What's new in V2:

✅ Automatic epoch rollovers
💵 New $vlY2K revenue stream
🤝 Open Source Codebase for Earthquake!
🔮 Greater Oracle provider selection

Previously, users had to withdraw and redeposit to/from the Earthquake vaults manually every epoch. This meant standing by for a deposit window, instead of doing the things you love doing.

This is addressed with the new Carousel™️  mechanism ↓

Through the use of designated Keepers, Carousel enables automatic rollovers for users and the ability to deposit for the next epoch at any time.

Keepers collect a small fee for gas, while depositors start earning $y2k once the epoch starts (rather than waiting for vault to open)

This allows users to stay in a vault as long as they wish (unless they get liq'd) and opt out whenever, while also maximizing their exposure to $y2k rewards.

Instead of worrying about the next epoch, you can now touch some grass 🧘‍♂️

(keep in mind -no deposits once epoch starts)

V2 also introduces a new revenue stream for $vlY2K holders :

The Information Tax 💵

This is a new deposit fee for the vaults which rewards earlier depositors.

In short, the later a user deposits into the vault, the greater the information advantage, thus the higher their fee.

In V1, it was reported that over 30% of protocol TVL came from deposits made in the last 30 minutes of a deposit window.

With v2, late depositors will pay a fee determined as shown below, according to the team:

the cherry on top is that the fees go towards $vlY2K holders!


Will we see the Emergence of the Y2K Ecosystem? 🌐

The new open source codebase unlocks new possibilities for Y2K, and I'm eager to see new products built top of Earthquake 👀

Open source is always good, but how will other builders take advantage of Y2K's unique development ?



Some ideas of what can be built:


- protocol offering insurance to pegged asset’ LPs
- projects building custom insurance products for their assets
- hedged farming vaults using Earthquake


Remember,

more utility for y2k products = nore value accrual for $vlY2K

For example, @delorean_gm is building a vault which uses a portion of locked GLP yield to purchase depeg insurance via Y2K.

This can be a handy tool for savvy investors who can tailor custom strategies based on their risk tolerance 🧠

https://twitter.com/delorean_gm/status/1664315966183084033

With V2, Earthquake will also be able to access more oracles 🔮

This enables a greater selection of assets to be added to the vaults, including risk assets in the future (!)

Vaults are also able to accept any other assets for deposits, such as $ARB as shown below.


Final Thoughts 💭

Y2K offers a unique solution to an underserved sector of DeFi - peg insurance, and V2 makes it even better:

- smoother UX
-  more $vlY2K utility and value accrual
-  enables new assets to be used
-  new opportunities for products built on top of Earthquake


Reminder - none of this is meant to be financial advice ❗ DeFi is inherently risky, so always tread with caution. This thread isn't sponsored - I truly think Y2K is building some cool shit 🤓

If you're looking to get familiar with how to use v2: https://medium.com/@Y2KFinance/v2-is-live-launch-user-guide-3281c153ce5a

Tagging some fellow bigbrains 🧠

@rektdiomedes
@schizoxbt
@chilla_ct
@OvrCldJonny
@arndxt_xo
@0xsurferboy
@thelearningpill
@jake_pahor
@0xMughal
@0xSalazar
@Louround_
@CryptoKoryo
@0xCrypto_doctor
@2lambro
@DeFiMinty
@Slappjakke
@_FabianHD
@DAdvisoor
@francescoweb3


Y2K Finance V2 Update

Reshaping the MEV-conomy with PBS 🛠️

How a shift in block building can help protect Ethereum 🧵

For most users, interacting on-chain rarely goes beyond completing a transaction for a quoted gas fee.

On the other side , however, is a highly competitive environment where validators are constantly battling to process blocks and reap the financial rewards for doing so.


A quick refresher on MEV 🔖

MEV refers to the extraction of economic value from the chain's transaction order flow:

Millions of transactions are submitted to the mempool daily. As such,  those paying the highest gas fees are always prioritized in the block building process.



In order to achieve a world in which blockchains like Ethereum can provide a global settlement layer as a public good,
some key issues need to be addressed:

 🏦  Centralized distribution of MEV rewards
 🤐 Transaction censorship

Let's take a closer look at each one 🔎

Centralized MEV Distribution

Block builders compete to reorder the flow of transactions in order to extract the highest value from gas fees. This is a computationally heavy process, which naturally favors specialized entities with greater resources.


This creates an inherent centralization vector as these validators will accrue more rewards than their competitors, allowing them to spin up new validators at a faster rate to capture a larger proportional share of network rewards.

A simple analogy:

Ideally, this MEV should be distributed in a way where validators are not required to be expert block builders in order to receive their share of validator rewards, and all validators can equally reap the economic value of block production.


Transaction Censorship 🤐

Today, validators hold the power (and even regulatory obligation) to blacklist certain addresses.

Remember when the U.S. Treasury sanctioned @TornadoCash ?

https://www.bankless.com/tornado-cash-sanctions-goerli-testnet?ref=bankless.ghost.io


The Solution: PBS 💡

Ethereum researchers have been taking a look at Protocol Builder Separation (PBS) as a solution.

The concept is quite simple. As its name suggests, PBS separates the block production process between two distinct groups – block builders and block proposers.


Under PBS, block builders are responsible for compiling a bundle of ordered transactions, and then submitting this bundle with a bid to a block proposer.

Block proposers are then responsible for selecting the bundle with the highest bid, and sending this bundle to the new block.

This means two crucial things :

- Proposers will not be able to reorder or censor transactions based on block contents.
- Participation in the block production process is more accessible for individual home stakers and smaller validators.

Where are we now?

Today, alternative solutions like Flashbots' MEV-boost relays are testing the waters for fighting the issues with MEV.

MEV relays can be thought of as an off-chain version of PBS - they allow coordination between proposers and builders.


However, it is important to keep in mind that middleware solutions like Flashbots are not long-term fixes as they do not exist on-chain, raising unique centralization and censorship risks even as they address some existing ones.

https://twitter.com/nero_eth/status/1574805871544213504?s=20


It will likely take another 1-2 years to see any major rollouts, but
the wait should be worthwhile, as PBS is a big milestone in achieving a more decentralized, secure, Ethereum network.

Read the full version and subscribe to the @BanklessHQ newsletter 💡 https://www.bankless.com/eth-power-balancing

Tagging my fellow chads, it's been a while 🔊
@rektdiomedes
@schizoxbt
@chilla_ct
@OvrCldJonny
@arndxt_xo
@0xsurferboy
@thelearningpill
@jake_pahor
@0xMughal
@0xSalazar
@Louround_
@CryptoKoryo
@0xCrypto_doctor
@2lambro
@DeFiMinty
@Slappjakke
@_FabianHD
@DAdvisoor
@francescoweb3

Reshaping the MEV-conomy with PBS

One chain, three tokens to rule them all 🧙‍♂️

A Deep-Dive into the @berachain Economy 🧵👇

First, a disclaimer for all you degens:

None of this is financial advice. Always DYOR and be careful with new projects of any kind 💯 (This thread is NOT SPONSORED - I just like what the Beras are building)

Now, if you're wondering "wtf is berachain" 👇https://twitter.com/pt1mfv_/status/1645562334684016645?s=20

The Beraconomy 💱

Consider this framework for decentralized economies, as the Beras see it.

Each blockchain must have one of each:

⛽  Gas token
🏛️  Governance token
🪙  Stablecoin


Thus far, no chain has been able to achieve all three. The closest we got to this was Terra/Luna, so does that even really count?

Bera fixes this. It aims to be the first L1 to achieve all three components :

⛽ $BERA: gas
🏛️ $BGT: governance
🍯 $HONEY: stablecoin

$BERA ⛽

As the gas token, BERA will be used for txns. Block rewards will be distributed in $BERA, making it one interesting gas token.

Rewards correspond to an asset's consensus weight, meaning participants will naturally compete over weights and emissions.

Wen Bera wars?

Berachain depositors will receive $BERA over time, and they will also be able to stake $BERA for $BGT.

Users who then stake their $BERA to receive $BGT will be able to vote for various proposals and governance decisions (such as the rewards distribution for their specific asset)

🏛️ $BGT

As the Berachain governance token, $BGT will be non-transferrable - it can only be acquired by staking $BERA.

This is bullish:

- more long term users in governance
- majority fees go to BGT holders
- protocols can accumulate $BGT to bolster voting power (bera wars 🪖)

Where do the fees come from for $BGT holders?

- DEX swap fees
- perp fees
- liquidation fees
- interest rates on $HONEY loans

Remember, Berachain will have a native vAMM, DEX, and borrow/lending facility to support these.

Also, all fees will be paid out in $HONEY 👇


🍯 $HONEY : native stablecoin

$HONEY will be a CDP stablecoin pegged to USD, with a 150% minimum collateral ratio (think $DAI from MakerDAO).

I'm glad Berachain devs chose to adopt a proven stablecoin model, instead of trying to build some dual-token algorithm (remember Terra?)

Users will be able to borrow $HONEY against deposited collateral (loan parameters not specified yet), or they can swap freely for/from assets on Berachain.

As the base liquidity layer on the native vAMM, HONEY will be abundant and liquid.

What can you do with your HONEY?

- anything
- trading
- leverage staking  (borrow $HONEY → buy more collateral → borrow more $HONEY. obviously leverage is risky)

Since assets are automatically LP'd with $HONEY, projects looking to boostrap liquidity may be incentivized to deploy their asset on Berachain .


Just for reference, there's a handful of decentralized stablecoins coming in 2023 worth noting:

• $USD0 from @tapioca_dao
• $GHO  from @AaveAave
• $crvUSD from @CurveFinance
• $DINERO from @redactedcartel

Will we see these bad boys come to Berachain ?? 👀

 The Berachain Flywheel 🎡

Considering the dynamic relationship between $BERA, $BGT, and $HONEY, we can speculate some things:

Assets LPd with $HONEY > more liquidity > more traders > more fees > more $BGT demand > rinse and repeat ♻️

(visual c/o @burstingbagel)

Remember, demand for $BGT = demand for $BERA.

As participants are more incentivized to stake their $BERA rather than to hold it liquid/dump it, this could make $BERA a pretty neat token to accumulate. It also means likelihood of crazy volatile price movements, as liq. deepens.


- Since $BGT can be used to vote new assets into consensus, protocols may accumulate $BERA to lock as $BGT to vote their token into the consensus token whitelist.

- $BERA may also be accumulated to stake for $BGT to vote for emissions distribution and deeper liquidity

WHY create a tri-token system ?

- seperate gas token from governance = more creative incentives to earn governance token
- keep users on chain by catering to all needs - gas, governance, and stables
- achieve what other L1s have failed to do thus far


Catch the full version here: https://pt1mfv.notion.site/Exploring-The-Beraconomy-36845ae0612d4cf0ac22835a93ac8d63 or read the unrolled on my Typefully portfolio: https://typefully.com/pt1mfv_/2VCx4Pv

No mass tagging this time because I want to switch it up a bit.

Curious to hear people's thoughts on the Beraconomy 🗣️👂

A Deep-Dive into the Berachain Economy

Liquidity is what keeps DeFi alive - and the stickier it is, the better for everyone involved.

A guide to building sticky DeFi with @berachain 🐻⛓️

What IS berachain?

Assuming it's real, Berachain is a DeFi-native L1 built to optimize capital efficiency and capture deeper liquidity on-chain. This is made possible due to an innovative consensus mechanism and a tri-token structure which we'll discuss today 👇


Before we dive into the honey, it’s important to understand why we’re here in the first place: The Curse of The Mercenary Capital 🦹

Observing a handful of TVL charts for L1s highlights a common trend : liquidity has dried up.

While some of this bear market and the rise of L2s, the data indicates that overall, most DeFi users on these chains are not long term participants.

Rather, they deploy funds on-chain, yield farm some inflated 3-digit APYs, and then move on once they stop getting free money.

Are these users in the wrong?? Not in the slightest, imo- “Don’t hate the player, hate the game”

The fact of the matter is, these chains don’t offer nearly enough utility and composability to incentivize long term use.

There's good news though...

But how so?

Through a novel consensus mechanism called Proof-of-Liquidity, and a balanced Tri-Token structure, Berachain gives users a chain that they can actually stick around for.

And the best part is its not even a meme. I think?

Let's dig in the mechanics ⚒️

Proof of Liquidity 🍯

A novel consensus mechanism to power Berachain:

Users to participate in the chain by staking assets which are used to a) validate transactions , and b) provide liquidity for the native ecosystem, in exchange for block rewards and LP fees.

Users stake assets (ie various bluechips and stablecoins) through consensus, or validator, vaults.

The consensus vaults are then responsible for:

• calculating validator vote weights
• block rewards distribution
• liquidity incentives

Similar to delegated Proof of Stake models, users can delegate  staked assets and voting power to a validator of their choosing.

Staked assets will also be LP’d with $HONEY, the native stablecoin, to support the native DEX, lending market, and help maintain the $HONEY peg.

It’s worth noting that users may experience partial loss of deposited funds (ie deposit 10 ETH, 9 available to withdraw later) due to the pains of proving liquidity and impermanent loss.

However, the chain is designed to offset losses with block rewards and earned fees.

The Tri Token Economy 3️⃣

The Berachain economy consists of 3 designated tokens which all serve their own fundamental purpose to the chain:

⛽ $BERA > gas token

🏛️ $BGT > governance token

🍯 $HONEY > stablecoin

The tri token system makes it possible to achieve deeper liquidity and capital efficiency.

By separating the gas and governance token, Berachain makes it possible to earn and accumulate the governance token while simultaneously using the network and providing value.

This simple but positive game theory mechanism helps create sticky liquidity as long term incentives are more rewarding for users, unlike chains whose users have to pay for gas fees with their governance token.


$BGT holders will earn real yield on fees from the native berachain ecosystem (swaps, interest rates, funding rates, liquidation fees etc).

Meanwhile, $HONEY will power the ecosystem as it will be the unit of account & will pair with all LPs. Wen $HONEY stable farms?

Users who stake their assets on Berachain will receive block rewards in $BERA. If a user stakes $BGT afterwards , they will achieve the trifecta : $BGT (given) >> earn $BERA >> earn $HONEY

Don't fade the berachain flywheel anon (from @burstingbagel thread)

I'll cover the berachain economy further in-depth in a separate thread so be sure to stay tuned for that ☝️

So let's recap as we get to our last point: WHY berachain??

Let’s address some fundamentals as well as some interesting possibilities to consider:

Capital efficiency : Berachain aims to put an end to the rotatoor movement previous L1s have suffered from by providing a structured incentive system that is aligned with long term users.

A native DEX, perps exchange, borrow/lending, all powered by the Tri token economy 💪

Easy onboarding: Leveraging Ethereum and Cosmos technology makes it easy for more projects to build on berachain.

Not only does Berachain use the Cosmos SDK and Tendermint consensus, but it is also an EVM chain, significantly increasing the potential number of projects and users

A new Curve wars?

The Proof of liquidity model creates potential for a Curve-like bribe market. Since the consensus weighting determines the distribution of $BERA block rewards, projects may be incentivized to duke it out for the highest number of votes.

Also, apparently the berachain and @LayerZero_Labs teams are close and its a matter of wen not if bera goes omnichain , so we are only at the tippity tip of the iceberg (if it is in fact, real)

Some exciting things to keep in mind! Who says L1s are dead?

Remember - none of this is financial advice. Always DYOR and ape diligently. I don't even know if berachain is real or if @schizoxbt just brainwashed me 😵‍💫

So don't buy any fake berachain tokens yet - instead join the @Bera_Land discord for the latest on all things Berachain.

Tagging the CT fam ❤️

@rektdiomedes
@Chinchillah_
@defi_mochi
@CryptoKoryo
@0xCrypto_doctor
@2lambro
@0xFlips
@DeFiMinty
@Subli_Defi
@0xsurferboy
@crypto_yuvi
@burstingbagel
@DAdvisoor
@defiprincess_
@francescoglt
@Louround_
@CJCJCJCJ_
@crypthoem

@thelearningpill
@0xSalazar
@WinterSoldierxz
@_FabianHD
@jake_pahor
@kindahangry
@Slappjakke
@arndxt_xo
@CryptoShiro_
@ThisIsM1NH
@crypto_linn
@rektfencer
@NNovaDefi
@OvrCldJonny
@0xShinChannn
@DefiIgnas
@Auri_0x
@0xFastLife


Building Sticky DeFi with Berachain

Recent events have reminded us that stablecoins aren't always so.. stable. What if there was a way to bet on this stability?

A friendly guide to Earthquake from @y2kfinance 🧵

Remember that Saturday morning a few weeks ago when the price of USDC dropped below $0.90 on the back of the SVB news and for a few days it seemed like the entire crypto industry was at a tipping point?

Feels like ages ago, already

Depegs are not good for anyone. The markets can absorb volatility with a ponzi token, but stablecoins are a whole different ball game ⚾

Unless you had a way of predicting these deviations - and making profit from them too.

Enter Earthquake from Y2K Finance 💥

An easy way to think about Y2K Finance is a prediction market for stable assets -  made possible with their flagship product, Earthquake.

Earthquake consists of two codependent vaults, Hedge and Risk.

For easy reference, remember this:
📉 Hedge = yes depeg
📈 Risk = no depeg

Earthquake vaults are crypto's CAT bonds.

These are debt instruments used to raise money for insurance companies for emergencies like natural disasters. Issuers receive the payout ONLY IF conditions are met (disaster strikes)

Likewise, with Earthquake vaults, depositors will receive payment if their stablecoin depegs/does not depeg. This isn’t your average DeFi strategy vault 🧠

TLDR; a win-lose scenario where one side bets on an asset depeg, and the other side bets on no depeg to occur.

To use Earthquake, users deposit into either one (or both!) of the two vaults, Hedge or Risk.

You select:
- Asset to speculate on
- Strike price
- Epoch
- Deposit amount

The protocol collects a 5% fee for Hedge and Risk Vault deposits, and 5% for risk collateral yield.


Keep in mind each epoch has a start date before which anyone can deposit.

The user receives an ERC-1155 vault token upon deposit, representing their share in the vault. This token can be staked to farm APR during the epoch.

Btw Y2K uses @chainlink oracles for its price feeds 🔮

Hedge 📉

Think an asset will depeg? Time to Hedge 🌳

By depositing into Hedge, users purchase "depeg insurance" and collect a share of the Risk vault deposits if the asset depegs.

Likewise if there is no depeg, Risk vault collects ETH from the Hedge vault

Risk 📈

Feel confident in an asset's peg? Choose Risk

Risk depositors sell depeg insurance - if the asset does not depeg, they collect Hedge deposits, and vice versa.

Keep in mind Risk vault receives the insurance premiums from the Hedge vault either way, as it is underwriting

a simple example for reference

1 user deposits 1 eth in the hedge vault, with 4 eth in the risk vault currently.

depeg occurs:

• Hedge depositor receives the 4 eth

 no depeg:

• Risk depositors receive a portion of the 1 ETH

(I did say SIMPLE example..)

So.. do they work? What's the alpha?

Finding winning strategies on Y2K is no easy task. Depegs are not very common and most times Risk vaults depositors are on the winning side.

If you ape into a Hedge vault because you see a 4 digit APR/ROI you will probably lose your money.

When in doubt, follow the smart money 🧠

Let's take a look at what the top 5 leaders on Y2K have been doing, courtesy of this incredible piece from @caZUBelli https://mirror.xyz/0x565D380416a2889b817C6Eb493f6DeeF029212Aa/I7I6XvJSRGO7uTjeqiFX7Xwa66Q7YoIunIRkhBpub2o

Whale 1 : 0xf9aeb52bb4ef74e1987dd295e4df326d41d0d0ff

Strategy: 98% Risk 2% Hedge

Whale 2: 0x5c6d32cbcb99722e6295c3f1fb942f99e98394e8

Strategy: 98% Risk, 2% Hedge

- Note the risk_vault earnings cover his losses from the hedge_vault - this guy is playing 4d chess.

Whale 3: 0x69c509e9765c49cc6b9b4568b90aa47b89f4992f

Strategy: 100% Risk for FRAX / DAI / USDC

- This investor has also been noted to reinvest 100% of his profits into the next epoch - a true Y2K maxi 🤯

Whale 4: 0xe9e1479a9a6dde5dd0ee4ac9bee0091eba5e9e37

Strategy: 98% Risk,  2% Hedge

- This investor DCAs into the vaults from opening til closure

Whale 5: 0xd97a2f65f89f99ce03ca8f3fd2431d053d387e8f

Strategy: 100% Risk for USDC


Take note of the similarities and trends in their strategies, and what you can learn from it for your own strategy. Also keep in mind, these are big boys playing with big boy size. Their risk assessment and preference can look entirely different from yours.


some dashboards for your reference 🕵️‍♂️

y2k finance overview https://dune.com/frijoles/y2k-finance

find the y2k whales https://dune.com/toubi/y2k

$y2k holders and activity https://dune.com/0xYaki/token-dawg-mode?blockchain_e06679=arbitrum&last_n_days_t94746=60&token_address_td507f=0x65c936f008BC34fE819bce9Fa5afD9dc2d49977f

Farming yields 🧑‍🌾

In addition to the vault payouts at the end of each epoch, users can earn some substantial yield by farming their vault tokens.

https://twitter.com/y2kfinance/status/1642970574069837828

My personal thoughts 💭

Innovative crypto projects are surprisingly hard to come by in an industry, so they’re always worth noting when you come across one. I believe Y2K Finance caters towards an underserved area in crypto and can generate some strong first mover advantage.

Furthermore, Y2K is still fairly new which means there's some exciting things to look forward to :

🔥 Wildfire : a marketplace for exchanging vault tokens (exit/enter positions in real time!)

2️⃣ Earthquake V2: Perps. binary vaults with 7 day protection, improved UX/UI

A quick word on security 🛡️

Nothing in life is risk free, but Y2K has been audited several times by Peckshield and Halborn, which you can view in their docs https://y2k-finance.gitbook.io/y2k-finance/products/earthquake/contracts-and-audits/audits.

The docs also provide a thorough overview of contract addresses and their individual functions

DISCLAIMER: None of this has been financial advice. DeFi is risky - always DYOR and be diligent about it.

Some sources to stay up to date on stablecoins 👇

- refer to “stablecoins” category on coingecko
- use defi llama stables dashboard
- stablecoins.wtf
- y2k discord


in the style of @schizoxbt :

red team 🔴

@rektdiomedes
@Chinchillah_
@defi_mochi
@CryptoKoryo
@0xCrypto_doctor
@2lambro
@0xFlips
@DeFiMinty
@Subli_Defi
@0xsurferboy
@crypto_yuvi
@burstingbagel
@DAdvisoor
@defiprincess_
@francescoglt
@Louround_
@CJCJCJCJ_
@crypthoem


blue team 🔵
@thelearningpill
@0xSalazar
@WinterSoldierxz
@_FabianHD
@jake_pahor
@kindahangry
@Slappjakke
@arndxt_xo
@CryptoShiro_
@ThisIsM1NH
@crypto_linn
@rektfencer
@NNovaDefi
@OvrCldJonny
@0xShinChannn
@DefiIgnas
@Auri_0x
@0xFastLife

Have a great day everyone 👋

Betting on Stablecoins with Y2K Finance

Most DeFi users don't touch enough grass these days. @Neutrafinance lets you earn yield on a delta-neutral GLP position, without any of the work.

A 🧵 on nGLP and what's new in V2

Contents:

🖼️ What is Neutra Finance?
🔎 nGLP and how it works
🆕 What's new in V2?
💭 Closing Thoughts

(THIS IS NOT FINANCIAL ADVICE. Risks are involved. Ape with caution and always DYOR)

Grab a coffee, get comfy - it's Delta-Neutral GLP strategy time 🧠

A quick word that you can view the full version here :

https://pt1mfv.notion.site/Neutra-Finance-nGLP-V2-c8e3a2973180406480ff77781a41ef6f

First of all, what is Neutra Finance?

A lesser-known Arbitrum gem, @Neutrafinance is a defi protocol providing automated vaults for complex yield strategies.

TVL is currently <$1m ($893.58k), but deposits have grown at a steady rate in the 3 months since launch 💪

A fresh project, Neutra currently only offers one vault, nGLP, which is the focus of this thread, but the roadmap indicates that more vaults are coming 👀

Besides vaults, users can also stake NEU and ESNEU on the Earn page to earn rewards and participate in (future) governance.

Security & Audits 🛡️

The protocol has been audited by @SolidProof_io , and v2 code is currently being audited by @CertiK.

A full list of protocol contracts and addresses can be found in the docs: https://docs.neutra.finance/neutra-finance/protocol-overview/audits-and-contracts