podcasts
Collection
Collection for podcasts • 511 items • Updated • 2
speaker stringclasses 3
values | text stringlengths 4 5.69k |
|---|---|
A | Bankless nation drama has ensued in the Ethereum defi lending space. Makerdao has opened up a vault with Athena, their brand new synthetic dollar use, and given it a line of credit with Dai. This allows market participants to loop their Athena position and leverage up on the yield that is being produced from the Athena... |
B | Good to be here. |
A | Mark Zeller, of course, very similar relationship, but over on the Aave side, the founder of ACI, which is one of the core contributors to the Aave protocol. Mark, welcome to Bankless. |
C | Hello. |
A | So we're seeing some developments in the Ethereum app layer around the lending space. Some different decisions are being made by your guys's respective organizations that I want to unpack and parse into. I want to kind of like attempt to see like a protocol here. What is it like to have the perspective of AAvE? What is... |
B | Yeah, sure. Maybe let's first just say what USD even is. Athena? USD is a tokenized cash and carry. So it's like a well known investment strategy where you go long and short on ETH or bitcoin, and then on the short end you go short the perps. And this allows you to have a delta neutral position and pocket the return th... |
A | Maybe, just to put it very simply, when Makerdao owns t bills, it owns the t bill asset. But in contrast, when Makerdao gives capital towards the Athena product, there is a buffer of an over collateralized vault in between Athena and Makerdao. And so there's that kind of like a circuit breaker there, a buffer, an over ... |
B | Yeah. So Makerdao does not give capital directly to Athena, the market will do that. So we just onboarded these vaults, and they're just like any other vaults. It requires leverage users on the other side to just wind this up. So when we put these vaults up, you have users who have USDE, and we also offer vaults with s... |
A | Okay, so just there's a loop being established here where there is a yield to produce USDe from Athenae, and then there is a yield, a cost, an interest rate to borrow Dai. And then market participants are basically able to arb these two things. And so they're able to borrow Dai to mint USD at some yield, use that USD a... |
B | Exactly. |
A | Okay, Mark, let's turn to you here, because there has been discussions in the Aave governance forums about off boarding Dai as collateral. And I think it's because of this brand new product, this brand new offering from the Makerdao system saying it's just citing the risk. So when you hear Sam explain this product, I'm... |
C | So the first thing is that we just have ten minutes of straight up, like, how would I quote that? Control facts and control truth. And the thing is that this cash and carry trade. If it was that seamless and that risk free, everybody would be doing that. Like if it's a money printer, I will do it myself. And it is true... |
A | Mark, can you kind of illustrate? Just like I want to just double click on the risks that AAvE sees in this whole system. I think you're saying that at a $100 million line of credit, which is what Makerdao started off giving this Athena vault, you're saying that that's probably fine, but the intentions of Makerdao has ... |
B | Yeah. Can I clarify about these numbers? Because some of them are just more technical details and less risk parameters. So the way maker works is that all of the vaults, including ETH and the PSM and now this Morpho vault that goes to Athenae are capped by this rate limit. So every. The rate limit for these Athena vaul... |
C | This the source of that is the maker that will governance forum. And the source of that is the post of block analytica. That is actually the guys that do this for you guys. Like, it's not a random number that created out of thinner. That's your words. |
B | I'm saying it's an arbitrary upper limit. Now, what is important is this hundred million number. That is the amount of debt ceiling that can be allocated immediately. Then there's a 24 hours cooldown, and then you can allocate another 100 million. This is the primary just to really. |
A | Make sure I get this right. So we can allocate 100 million and then it's like frozen for 24 hours, and then you can allocate another 100 million. So every 24 hours you go up 100 million? |
B | Yes. |
A | So $100 million every 24 hours does seem a little on the fast side. |
B | Yeah, but the important part is that you can cut it off if something goes wrong, there is an interrupt there, and so that's your maximum exposure. This 1 billion number is like an arbitrary maximum, and it's getting thrown around and it's like, it's not a particularly relevant number when you're considering risk. So ye... |
A | Couldn't in theory, happen inside of six days. |
B | Yeah, but I mean, there is a feedback process. So there's people watching the market conditions. We're going to ratchet this up slowly. Watch it. It's not just going to go maximum full throttle the whole way. So this is like setting the bounds, I guess. And then humans will watch and make sure this is done in a safe wa... |
C | But the thing is that the available liquidity is zero. So when the liquidity is used, what you're gonna do, like take the money back from the users, force the liquidation of the users. The only thing you can do is play with the interest rate. So you can incentivize the user to repay by putting them egregious interest f... |
B | Yeah, so this is all about duration risk. So we can definitely get into this and I can explain what will happen in, you know, in the event of a liquidity crunch or insolvency. Do we want to do that now, David, or. |
A | Yeah, so I think what Mark is saying is like, if you let it get up to 600 million and then make a risk analysis, is saying, well, that's, that's too much per market conditions. There's, we have too much exposure here. We're not able to sustain this level for whatever reasons. I, I think Mark is saying, well, how do you... |
B | Yeah, sure. So there's a whole bunch of different scenarios that can happen here. If there was sort of like, yes, we have too much exposure, we need to pull it back gracefully over the course of like a month or something. That's pretty easy. We just withdraw all the idle Dai. So these markets, they use utilization base... |
C | Let's use the real data right now. The real data, as we are recording right now, is that the position in Molfo that allows 20 x leverage. So the is amount of leverage currently has $1,000 of available liquidity out of $10 million of liquidity. So 99.9% of that liquidity is used. There's nothing you can do about it. And... |
B | Well, let me run through it. Okay, so. And first of all, the average LTV, the collateralization is 90 is 88%. So that's more like ten x, not 20 x, but kind of beside the point. Anyway, so let's run through the scenarios where, okay, let's say Athena has. There's two kind of different ways that there could be a d peg of... |
C | That is not true. That was true, like six months ago, but that's not true anymore. |
B | It's still true. So they hard peg. They hard peg. Stein to eth, are you going to. |
C | Mention me my own protocol, son. Are you sure? |
B | I mean, I just looked at your oracle the other day. You guys are still hard pegging. We do the same for the same reason. I think it's the correct decision. So anyways, hard pegging in this sense makes sense. |
C | Let's move on. |
B | Because there's lack of liquidity sometimes in the defi markets, it makes more sense to hold the asset and wait for it to return to peg instead of exacerbating the problem by fire sailing it with liquidations. And this is the kind of trade off you have with a lot of pegged assets. So now what? The situation where that'... |
C | Like, basically we're lucky it never happened in crypto. |
B | Okay. But this is a risk for pretty any. If you accept centralized assets at all, this is a risk everywhere. So you kind of just have to accept that this risk won't happen. And if you do that, you start looking at the more nuanced situations where you have losses on the margins. So this would be something like an opera... |
A | Mark, when you see the risks of the Athena protocol, where do you see the losses potentially coming from? What's the scenario in which you see losses needing to be covered? |
C | The important fact is to be clear that I'm not against Etna. I think it's an interesting cash and carry trade. What I'm less convinced is their ability to produce significant yield over time, because every arbitrage opportunity on the market. That's like basic finance is meant to be temporary. Otherwise we just print m... |
B | Okay, so for the point of the collateral onboarding, honestly, I don't view this as any different than any other collateral onboarding that we do. So, like, you know, there's been eth wrapped bitcoin lsts now, so these all exist as collateral. It's just a different set of risk trade offs. So, like, with ethan, WBTC, yo... |
C | Yes, not 60%. |
A | Sure? |
B | Yeah, yeah, it's going to go down. And, you know, the rates on aave have dropped down to that. Roughly that, too. So, like, the market goes up and down, and we just reallocate capital to as necessary. So if the rates drop sustainably on Athena, then the position will just unwind. So that's perfectly okay. We can go bac... |
C | I think that's where we disagree. And I think data is important to check here. And even if we disagree, let's agree on one thing. We love the fact that DeFi is auditable. So all the data I'm talking about right now, it's on makerbone.com. so if you go on makerbone.com, you will have all the source of collaterals of Dai... |
A | Mark, so it sounds like just reading, hearing what you're saying, it's not really about any specific decision that Makerdao governance has done narrowly. It's more about zooming out and looking at Makerdao directionally and saying that we are not comfortable with the direction of Makerdao. So it's not any one specific ... |
C | I think that is correct, because Dai is a decentralized protocol, and the protocol is actually permissionless and decentralized, no matter what people say. But the thing is that when decision making get concentrated, the evolution of this protocol is unpredictable and unpredictability is risk. And our job is to limit t... |
B | Yeah, sure. So I think this is actually a fair criticism about the speed that makers been going for the past month. What Mark said, where there was a liquidity crunch on Dai about a month ago when 600 million washing withdrawn. At the same time there was. The bull market was going absolutely berserk. So people were lev... |
C | Issue for us is trust. So it's hard to trust something that you cannot predict. And I think that it all boils down to this. And what Mekodao did for the past four years, it build trust. And because for the past four years, Mechodao was seen as a conservative protocol that cared about decentralization. And what happened... |
A | Sam, I think a lot of people, this has been an ongoing theme about Makerdao for a number of years now. I think this conversation first got kicked off, maybe with the inception of USDC as collateral inside of Makerdao, and then it got furthered with off chain t bills as collateral is like what's the identity of makerdao... |
B | Yeah, I mean, you said it yourself, this has been the plan from the beginning to use real world assets to scale die. I think everybody would love it if we could have a stable coin that scales backed only by ETH, or maybe lsts as well. But it's just impossible. You can't scale it. So there's the stablecoin trilemma, whe... |
A | So, Mark, bringing this to a close, can you kind of provide the Aave perspective as like, if that is what Makerdao's perspective is? What. What is Aave? What is Aave's identity? |
C | The main difference will be the sizing and the risk management. One thing that is important is that dosage means poisons. So what can be extremely interesting, profitable, and allow you to grow and grow your profit as a specific scale. And that's what is the most important for me to transmit during this podcast, and th... |
B | Yeah, I mean, like, we, like, I disagree with this being some sort of risky maneuver. The analysis been done. These numbers have not just been chosen at random. There's been deep analysis on the structure as well as the protection provided from the over collateralized vaults. And, you know, is the risk of die higher? M... |
C | I think it's important to recognize there's some more conservative and more risk taker protocol. And I have the feeling that historically, Aave was more risk taker and Makerdao was more conservative. Now, we live in a time where it's the reverse, but I don't think there's good or wrong answer here. At the end of the da... |
B | Yeah, I'll just say, like, a big admirer of what Aave and Aave Dow has done. I think your guys market is very safe as well, but I think both markets are safe. I think it's both Aave and Maker provide the conservative, safe yields in Defi. So this is, I think, where we have a lot of alignment. |
A | Well, guys, I think I definitely got exactly what I wanted out of this podcast, so I appreciate you guys both coming on. Sam, I know it's late for you. So, guys, this has been great. I think we definitely kind of unpacked a little bit about, like, again, what's it like to see, like, maker, what's it like to see, like, ... |
B | Yeah, thanks, David. |
C | Yeah. Thank you for this opportunity. I have the feeling that every party had the opportunity to present their point of view, and I think people listening to us will have enough element to make an informed opinion on it, and that's what we expect from media. So thank you very much for hosting us today. |
B | Of course. |
A | Bankless nation, you guys know the deal. If you guys haven't heard it enough already, crypto is risky. Defi is risky. Lending protocols, they're both risky. You can lose what you put in, but we're headed west. This is a frontier. It's not for everyone. But we're glad you are with us on the bankless journey. Thanks a lo... |
README.md exists but content is empty.
- Downloads last month
- 6