The Curve Wars | CurveMarketCap

Transcript

hey bankless nation welcome to another state of the nation episode the episode where we go over a topic that's kind of been in the headlines uh this is an exciting evening episode for us david usually we we record these during the day time and we're going to be talking about curve the curve wars more specifically curves curve like there's a lot of subjects to unpack here this has been something that's you know probably emerged over the last six months i think it's important that we cover it because we want to understand it more fully i feel like there hasn't been a podcast uh that has synthesized everything that's going on and i think this mechanism will repeat in all sorts of different d5

protocols so we're not only going to see these wars play out on curve we're going to see them all over d5 as well so it's about time we take the time to understand them who do we got on today we have a community a favorite um i actually did not ask if he goes by his name or not but he goes under the newsletter of curve market cap which i believe is a playoff of coin market cap and apparently curve is deep enough to justify an entire newsletter and so uh curved market cap has gone with uh just producing enough content out of uh out of about curve uh just unpacking what's going on in the world of curve wars and no other d5 protocol has had this whole

war thing going on and so we kind of want to figure out why does why does curve go so deep what is going on what is the game that is being played because apparently there's a lot of things to unpack and things to discuss and so uh curved market cap is going to uh unpack that for us oh yeah what's everyone fighting over why what are we fighting over what's more over we're talking about all that and of course guys you know prices are down a little bit on the year so got to tell you about crypto ira getting a crypto ira that is from our friends also they wanted us to let you know now is a fantastic time to open your ira account okay not only they want to let you know i want to let

you know i love these things david i i think crypto iras are the best way for retail to avoid paying taxes on crypto games this is the truth and that could be a lot okay and um i did this a few years ago when the market was down probably the best most like the most tax optimizer thing i've ever done was to open an ira and also convert some of my old 401ks to the ira structure and buy crypto this used to be hard to do but now there are companies like alto ira that are providing the easy button for this so they're just like integrated with coinbase that means you can purchase 125 assets a few clicks you're up and going you got all your

your paperwork filed and you've got your own crypto ira so go check them out it's time to open a crypto ira best time to do it is when you buy low in a bearish market in a dip whatever this thing is right now and you can do that at ultoira.com bankless check that out hey david i gotta ask you the question though before we get in what is the state of the nation today sir the state of the nation ryan is cornering because apparently that is what's going on in the curve wars apparently the curveboards is all about the game of cornering the market uh and it might have already been cornered by confidence someone won the war the thing is i i think this is what we need we need to

check on but i think the game just repeats because once somebody corners the market then it's about cornering that market and that's actually what i found out is actually quite interesting about this whole curve wars thing um so ryan on this state of the nation we are cornering all right we're gonna find out how the curve market here the curve markets get cornered and we've got the expert to do it to do that coming up we're going to introduce him right after we say hello to the fantastic sponsors that made this episode possible polygon is ethereum's largest and most vibrant scaling solution to date with millions of monthly users and all of the biggest defy apps the polygon ecosystem has turned into a blossoming metropolis of defy activity transactions on polygon are quick and cheap allowing users the

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bankless hey guys we are back talking about the curve wars we're here with garrett hall he runs a newsletter called curve market cap fantastic newsletter that uh covers the curve ecosystem and when we tweet it out who is a person who can come on bank lists and explain the curve wars the resounding answer was curved market cap garrett hall the person that we have as a guest today uh garrett it's great to have you on bank list how you doing thank you thank you it's going good i have to ask is it still bankless or after the market crash are you down to a homeless yeah yeah we're getting there yeah we're getting there we aspire to be homeless one day

we tweeted out that meme before someone could use it against us right that's the thing you have to do is uh you know scratching out bankless front front running attacks uh you know how twitter can be speaking of twitter you were recommended to us on twit twitter from uh cryptocondom i believe who apparently is a brilliant voice uh on curve and on d5 and i am just blown away by how interesting this community is uh and i wonder if you could start garrett by telling us a little bit about yourself like how did you get into curve and kind of your background to give us some context because crypto condom didn't fill us in they just said you need to speak to garrett oh these late night streams are weird we're already entering the after dark

territory right so it can be explicit no i got my start in crypto actually back in 2014 and um uh for various reasons was out of the space until about 2019 when i popped back in and at the time i'd had like some bitcoin lying around and i was just looking for places to earn yield on it and at the time i was actually looking at finance of all places i'm an american citizen so i can't use binance but i was saying what on earth is going on how come like they're actually able to get these incredible yields on things so i asked a colleague of mine and i was saying hey what do you know about this and he was like stop don't look at binance look at curve and this was at the time that curve was having its curve swerve drama

uh i don't know if you were around to remember that it's like very old swerve was a freak of curve is what i remember what i recall exactly exactly um so i started to poke around and take a look at it and the more that i read the more that i learned about curve just the more mind like uh more the more my mind was blown so i just decided to just dive all in that's awesome yeah and uh what about it blew your mind i'm curious garrett like what's cool about it so there's a number of things um if you look at where it is today it's phenomenal it's got nearly 20 billion dollars in value locked according to defy lama by far the largest source of

liquidity in all of d5 this is now across eight chains the mathematics behind the curve pools are bespoke so when you read through the curve white papers they get into incredible detail and very high higher level math and i'm a huge math geek so that really definitely appealed to me um in a nutshell it allows for incredibly high volume transactions with extremely low slippage which makes a huge difference for whales and you two are probably whales but for peasants like me the curve tokenomics is also incredibly generous at splashing these fees to curve holders that's super cool and just uh maybe for people who aren't as familiar with with curve at a high level could you even go

back and and sort of explain that so this is a decentralized exchange i believe uh of the automated market maker variety so sort of like a uniswap where you are you know trading with a with a protocol and a pool on the other side but it specializes in similar uh tokens right so like you know stable coins would be one uh you know where the tokens are like kind of a similar value and curve tries to sort of equalize them you could probably explain this better what is curve in a in a nutshell at the highest level i think that's a good explanation what you provided so it definitely got its start as a stablecoin amm and there was

also something that i found really interesting about the protocol is that they had kind of looked at the existing capabilities of trading between like type like price tokens and they figured out more efficient ways to adjust the formula so unit swap which you mentioned is the constant product x times y equals a constant and that works fairly well but then it kind of runs into some issues in that it can produce more slippage um the michael egerov white paper on this essentially figured out a way to combine a linear constant invariant with a the product constant variant that allowed it to have the low slippage that you would like to

see at that would you would see from a linear invariant and the capability of kind of shooting rapidly towards uh imbalance and as a result the pools can stay maybe 70 percent imbalanced and not see too much in the way of issues which was very useful for the curve v1 which focused extraordinarily on stable coins for the visual learners out there x times y equals k is the classic unit swap curve and that is just a normal parabola that is very uniform and curves innovation and what garrett just explained using math i'm going to try and explain using visuals where the center of the curve the center of the parabola is flattened and what that

means is that when you have uh two of these two of these things as in two trading pairs because the where the curves meet is flatter these pools can be more and more imbalanced from each other as in we could have like 70 000 usdc on one side and only 30 000 usdt on the other side and these things are still trading at basically one dollar and so while the pools are out of whack in how much supply there is the trading prices on these things still trade really really close to one to one and that's a feature that unisa that uniswap does not have you know what v2 does not have because a 70 000 supply of usdt on one side versus 30 000 on the on the other side for uscc

would represent something like 70 cents versus a dollar 30 something completely out of whack and so curve really came into the market via this flattened curve of the of the unit swap of the of an amm that really optimized for trading like kind assets so curve made this assumption that you can trade uh you can that you can bend the curve a little bit and allow for much more optimized trading of uh like kind assets and this has done i think just a phenomenal job on just literally curve v1 is focused only on like kind so stablecoin to stablecoin and of course unit swap is very good at uh transacting between different coins and i think

twilight towards a bit later we might get into curve v2 pools which is this whole kind of elevation on top of it but just even in terms of where we've come from uh this is like a loud curve to attract a ton of liquidity to the tune of about 20 billion dollars yeah that's exactly right and we definitely want to unpack curve v2 versus uniswap v3 because there's been some rumblings about does uniswap v3 eat into curve and some people think yes but then curve fans really think no but that conversation is coming at the end of the curve wars conversation well we want to talk about the curve war situation first i know uh ryan i know you have a question what's up uh i was just going to ask like because when

people are hearing uh about curve and if they go to the curve website uh in like the app itself this is what it looks like and garrett i have to ask this is gonna throw a lot of people off like it looks pretty basic it looks pretty janky looks pretty mindy this is like like 90s and um but but can you tell us i mean we talked about the liquidity in this thing how much volume is this user is this user interface is this is this protocol throwing off right now are we talking some large numbers yeah so you can scroll down to the bottom and the volume is published right there we're seeing uh we're seeing about uh um [Music]

on curve itself about a daily volume often north of a billion and in fact during bear markets it even tends to spike a little bit because so many people need money fast maybe they've printed too much like of liquidity usd which is a lending stable coin and they need to cover their position quickly so they jump to curve because curve is one of the few things that does pretty well during uh bear market gas fees might be spiking but they'll take out as much as they can to try and cover their positions so in fact during the market crash of the past few days we actually saw a curve routinely exceeding a billion dollars in trading volume per day in some cases two billion are people using this interface or is it

all happening kind of money robots behind the scenes aggregators that sort of thing like i so personally i do think that this super retro interface is gorgeous um but i'm like older than the average person i also happen to know that they're working on a new ui which is a bit more of like a windows 98 type feel oh cool getting an upgrade going from like uh windows 31 to 98 that's great but i myself like i'm a super geek so i just tend to do most of my stuff in brownie which is a pythonic smart contract testing suite awesome very cool so let's go ahead and dive into the curved wars so now that we understand what curve is we kind of want to figure out why there is a war

happening and who's fighting that war uh and i think this conversation starts with the crv token garrett can you kind of take us through the unique properties of the crv token and why it's instigated a war yeah and unfortunately the victims of the curve war seemed to be everybody's portfolio this past week so i'd say in a nutshell the uh the big value behind the curve token is two things uh there's the revenue share component and then there's the government's aspect of it so diving into each of these with the revenue share all the trading fees that occur when people are trading on curve usually it's about four basis points and that's split

evenly and vecrv stakers earn 50 percent of that so if you stake the curve token the crv token it turns into ve which i think stands for vested curve token and uh those people get 50 of those four basis points for whoever's taking right that's correct it's a vote escrow crv excuse me and and the vecrv is very interesting in that it is um non-transferable you can't do anything with it other than that it's an erc20 token um the curve itself is transferable you can do whatever you want with it but curve by itself does nothing so you have to lock it to get the benefits um and then curve implemented the system where if you lock it uh you have to do the maximum lock of

four years to be able to get the boosted rewards that were on the screen shown earlier so that's uh the curved dow voted into existence the property of allowing users to vote with their vecrv on the emissions of curve that these different pools would would receive so you get some fees from the basic trading activity but then you also can get um a you can get a minimum of the number on the shown on the left and if you have enough vecrv locked you can earn the maximum boost which is the 2.5 times that number on the right so by locking your curve as vecrv you can achieve this maximum boost in some cases double digit

um and some and i've seen as high as triple digit apys in terms of the in terms of the value you can get from from staking in these pools so when you say boost um that is yield farming correct and when you stake your your curve for the maximum amount of time which is four years it means you're not getting your curve back for four years and that's a one-way decision it's not like you can go command-z on that like once you stake it it's in there but then you are also getting the maximum amount of emissions because that is because you've locked it up for the maximum amount of amount of time you're getting the maximum amount of emissions as a result of that um of that staking and those emissions are

in crv token they are although it's not as good as that because the vec rev that you have also linearly decreases over time so if you lock for four years today the ecrv will drop to zero by four years unless you extend your luck it drops to zero as in it is deleted no you still have your curve but the vecrv you have drops to zero okay wait but i thought ve crv is is curve just vested or voting no you you you lock the curve you receive this vecrv token it starts at the amount of curve that you have but it depre it decreases linearly over time until you have

nothing left unless you extend your lock okay uh and extend the lock of the crv token uh yes okay okay so you take your bag of curve you lock it and then you have to keep locking it if you want to keep getting this maximum boost so it really does incentivize tying up the curve keeping a massive amount of the curve off the market was that the intent of the design here is to just like um increase the value and price of curve or is the intent to i guess uh incent governance of the protocol why the why the lockup in the design of curve and here's where twitter did you wrong because you really should have invited

on michael edgarov or someone actually designed it um because i can just speculate i would assume that it is for these reasons to massively extend the amount of curve that is locked and therefore off the market uh as you know four years is a massive amount of time in d5 um like four years in d5 time is what like 80 years in real time oh at least we meant we invented d5 like three years ago yeah so but still until convex came around people were doing this people were taking their curve and they were locking it for four years which is a amazing signal so i think it's something like 80 of the curve is just completely off the market um

which is pretty wild if you think about it and one of the re perhaps the reason why this dynamic exists at all is specifically because of the emission schedule of curve and also the boost and also the boost dynamics but curve has this very aggressive emission schedule where it's inflating at an insane amount but the reason why that doesn't result in just like a complete dump of the value of the token is because everyone's locking it up for four years and then also re-locking it up for four years and then they're locking up their emissions that they get for four more years so that they can get more emissions so that they can lock those up for four more years so what's really mind-blowing about the emissions schedule is it's actually a 300-year emission schedule

the final curve will be emitted and sometime in 2000 real years or something not deep in years okay wow um so the curve wars is going on for 300 more years it's a 300 year war after that who knows the war is done dig yourself in it could get wild um no the 300 years is like it's it's crazy um every august though the emissions rate decreases and in fact uh half the curve has already been emitted so we're already 50 of the way through the emission schedule it's been decreasing and every august when it decreases it's a fairly substantial amount so just to be clear if i own curve i lock it

as v curve for some length of time for being the maximum and then i'm eligible for this boost that means i get more crv rewards and am i also getting a share of um like that 50 of the um the fee on all transactions on all trades on kerf am i also getting that and if so what is that paid in so that is paid in three curve um the curve three pool contains die tether and usdc and when you stake your cur when you stake any of those coins into the three pool you receive a three pool lp token and that lp token can then be redeemed for dye tether or usdc so that's cool that's like a nice little dividend

and plus on top of the dividend the cash that i'm getting my also getting more if we translate this into the equities world i'm getting more stock right i'm getting stock as a boost for you know locking it up and then i'm also getting this this dividend which is basically a percentage of revenue generated by curve that's correct but if you really want to get the value the maximum value out of curve you can never actually get the value of the crv token back because if the game is to corner the curved market by having as large of a crv share as possible you always need to be locking up crv as long as possible and the only value that you get is your share of the stablecoin volume fees that

get swapped so the two basis points that go to the crv holders right so if you keep up on locking up curve forever and ever and ever and ever that's how you maximize your dividends that are being paid in stable coin fees but you can never get the crv back because if you start to offload your crv you're also offloading your rights to the point uh to the two basis points is that right yeah i'd say that's a fair characterization so uh you do have a dilemma like the price of curve was before the crash six dollars it's three dollars now most people don't even seem to care about the price though because if they've been locking their curve can't sell it until until the next presidential election okay so that's i think phase one of the

curve wars and things get even more complicated and even more crazy after this because i think what why there's so much excitement about convex finance is it seems to be that convex finance has started to really uh get into cornering the curve market would you say that that's a fair classification of context have we have we actually talked about before we get there have we actually talked about uh david and garrett like what else you can do because there's some voting aspect of this right it's like maybe we should talk about that because you're not only locking up um curve to transform the v curve to get the boost and the staking there's also like a governance right as i understand

it so that you actually get to decide which of the pools receive a share of uh future curve rewards is that an aspect we should talk about first before we get to your question david and set that up yeah that's worth getting into so uh a lot of protocols have governance rights and sometimes it's not clear what those governance rights do with curve it has a very strong degree of decentralization and nearly every aspect of curve is managed by the uh by vecrv holders so most commonly this is to periodically vote on which pools get the most rewards

um and we'll get into a bit more of the mechanics especially how convex disrupted all of that um but basically if you like if you see those boosts and the um emissions on the front page that you looked at earlier that's all voted on by the community the community decides which pools it's going to reward and there we go if you click on home actually the dow is also a good place to do it too all those rewards t aprs are what the community decided we vote that this pool will get ten percent max boost the next one three pool gets one percent max boost uh that's just uh straight up vote of vecrv holders and so what this is doing

is this is uh directing what stable coin pools get more rewards in emissions and so what that's doing is that's incentivizing liquidity to come into put into curve for specific stable coins uh and so for stakeholders for somebody like um susd if somebody was uh incentivized to really bootstrap susd liquidity they might want to vote with their curve tokens to uh incentivize susd to come in and so they would vote in the using in the dow using their crv tokens to put more rewards in the susd pool uh and so how has this played out what uh what stable coin pools has the dow elected to

incentivize the most and how often does that change or is it relatively stable over time uh changes roughly weekly and you can actually have full transparency into how the dow is voting on it and you can therefore try and move your coins around to the pools that are going to be uh going to next week be like getting more rewards or if your pool's losing rewards you can move out of it some protocols also choose to uh like the susp that you're pointing out also choose to issue directly rewards in their own token yes next token so you can see so you can see some examples of that um [Music] and so yeah go ahead and yeah so

um is it fairly balanced or are like from the from the perspective of stable coin operators like how badly does like circle for example really want uh usdc liquidity or are those are these types of who's really playing and why are they playing in this game like what are their interests in bootstrapping certain liquidity pools over others it's a good question so i think one really good example would be steph and f are you familiar with lido finance and their staked like uh staked aetherium totally so if you have 32 ethereum you can run a validator node yourself if you have maybe one ethereum and you want to get the five percent interest rates um

you can't do that directly but what you can do is you can go to steph uh lido finance you can stake your ethereum there and they will give you a step token which is uh relies very heavily on people believing that the steph ethereum pig is always one-to-one so it's very useful for them to have a lot of liquidity in this pool because they want to be able to move between eath and steph fluidly if there's not a lot of liquidity in the pool then you might end up seeing a run on the ethereum and it'll just be over balanced with steph that's cool so what's interesting here is it it it feels like there's uh some

value some additional value to a v curve right so like i guess there's there's value because v curve pays out a dividend and the boost rewards of crv but there's also value in the governance vote itself because that governance vote um you know as allocated as a percentage of a v curve actually uh dishes out a lot of capital it seems like a lot of liquidity rewards here and how much are we talking garrett like how much money are we you know talking um that that goes through this reward system we're talking about like millions of dollars um

you know more than this yeah when we get into the um further down the flywheel towards vodium you'll see that uh to be able to influence this protocols are putting in roughly uh on the order of like a million dollars cash equivalent per week wow okay so if i'm if i'm lido then and i want to create liquidity for um steak teeth and uh the eat pear uh or maybe i'm rocket pool and our eath and you know the eat pear or something then um how much am i willing to pay for is this where bribing comes in like how much am i willing to pay to get liquidity on my on my pair like

or do i have to buy a whole bunch of curve and you stake it as v curve in order to do that or it seems like the curve wars are about the secondary market that's popped up and created kind of a way to pay v-curve holders somehow in order to sway their votes is that what's going on here yeah and when we look at the raw value of curve you know there's the trading fees which are of interest to everybody and then these votes are probably not of interest to you unless you're operating a protocol but if you are operating a protocol it can be massively important to you and it's it's fairly fairly interesting because this decrv mechanic as we get

further and further down the flywheel we can see where it really has advantages in being able to somewhat separate out these different um these different needs because protocols all have their issues to deal with so they often have conflicts of interest between like whales lp holders and figuring out what they're going to do with their own emission so if you look at the this voting system it does a really good job of being able to split out some of this value and convex was able to basically just swoop right in figure out exactly how things worked well within this ecosystem and use it to architect their protocol to really intermediate themselves in a

non-parasitic way into this market is this where we should get into the conversation of convex finance i think i think it's time uh garrett what is convict's finance and why is it such a big deal so uh my colleagues told me that convex is so perfect and he asks me it has to have been designed by someone to curve right right right and i have my doubts on this um but i do agree that convex fits in perfectly as uh the aforementioned crypto condom sites that convex solve the emissions problem that curve has in the short term but it's not parasitic so it fits in nicely and only serves to amplify all

the benefits of curve so essentially convex streamlined the process of allowing protocol owners to bribe different curve pools and it did this by when they launched they solved a problem for the liquidity providers on curve which was this need to stake your curve for ve crv lock it up for four years keep extending your boost it's really difficult to do and it required a lot of gas it required a lot of kind of constant management convex automated it so they said you take your curve lp token that you get for staking and instead of staking in the curve rewards gauge you stake it into convex convex is going to manage the vecrv for you every curve that convex gets is

going to lock it up for four years and it's going to pull that all together so everyone gets just about the max boost and then they slice off you know 10 or so for themselves okay and is it fair to say that convex has successfully cornered curve yes convex is about 50 of the uh voting interest and curve at this point and by the definition of what convex is and how it operates it's never going to lose that market share no no so there was probably a time when someone could have out-competed convex that time who knows maybe something will happen in the future and it could happen uh where someone else finds an entry to uh

compete but convex doesn't use this building share for itself it then turns that back on over to convex owners to be able to bribe the curve pools that they want through the vodium protocol okay okay so is it now instead of the curve wars is it now the convex wars like did we just pass the wars down the line to the winner i still think they're all kind of part of the larger global conflict [Laughter] so it's a new front in the curve wars perhaps so convex hasn't just won the war and the war is over there's going to be like it's just won

the battle i suppose and the war is now the battleground convex is now the battleground okay all right so so convex basically just automated the bribing process that was already going on on curve right they just automated all of that and now they they dominate it what what's in it for convex what does convex gain out of it and um i guess it's not parasitic right is this a symbiotic relationship of some sort like why does why does curve does curve benefit from this or is uh convicts the you know the organism that's that's chiefly benefiting from

this relationship so they do appear to be in symbiol system which both seem to benefit and this is where this concept of this flywheel came in and that these are sort of intricate machines moving together and they just tend to throw both throw off a ton of cash to whoever happens to be standing near by them and so i i'm actually really fascinated by this because uh at one point in time i wrote this article i can't remember what it's called but it used conway's game of life to describe some defy apps about uh gary are you familiar with uh conway's game of life i am yeah yeah uh listeners should look it up um it's kind of hard to explain but basically it's just these very programmatic rules that

if you design them correctly they take on these life forms that perpetuate often to infinity and so like there's been a lot of like defy innovations these days that kind of just feel like uh obfuscated ponzi games but that's not what this feels like this actually feels like oddly sustainable yeah here's here's conway's game of life um this uh and so like you make these different shapes they they react to each other yeah like there's a fantastic animation there's these self-perpetuating little organisms that with you know some inputs create infinite outputs and just exist and it seems to be that uh convex and and curve are the right constructions combined with the right issuance to just be kind of

filling the original ethos of what d5 was supposed to be which is these long-term self-perpetuating fully decentralized applications that really return value towards the lps and the governors like is this seems like an elegant model like would you agree with that description yeah the and this is why convex really made a splash when it first hit because the curve community is full of a lot of very smart people because of course you have to be smart if you're going to understand all these complexities of curve in the first place and when you look at the way each element of convex is architected it's sort of filled in some of these gaps from the user interface perspective

so like the hassle of having to lock your curve is kind of gone if you want a liquidity provide it's just so easy to dump it in convex you don't have to wait four years you can get your money back convex introduced a wrapped form of curve called convex curve you can always take your curve give it to convex and get a con token back the convex curve token can be staked into convex to earn convex curve and three curve so you get the dollars and trading fees that you would get from staking curve you also get um a curve back from that and you also get convex back from that and and convex takes that of course they

then use that to increase their overall stash of vecrv thus increasing their voting rights and this is actually able to maintain its peg in the same way that steph does by having a curve factory pull between curve and convex curve launched so if you ever want to take your convex curve and trade it back to curve you can do that any time as long as the convex curve curve factory pool maintains its peg it's kind of funny we we started a part of this looking at the the curve interface uh and how rudimentary it is but it strikes me that's that's almost like the like the firmware level of this protocol right it's like you don't really have to i mean that can be um abstracted through things like convex and that's maybe more the

user interface that that people are actually using practically but one thing i'm i'm hung up on here still garrett is like um this idea of bribing like bribing doesn't have a positive connotation does it right so like okay like you're brought let's say this was a a corporation and there were some you know voting uh shares in the corporation and you were actually um bribing shareholders to say um you know say it's apple to give you a contract like um we are part of the supply chain that wants to make iphones and so rather than you know compete and win

fairly at that game i'm going to just call up a whole bunch of apple shareholders i'm going to bribe them in order to vote to assign my supply chain company uh the the apple contract um that doesn't seem ethical right i mean like bribes are bad aren't they uh or uh talk about this a little bit are bribes bad in this system or is this some sort of transparent bribe that is like actually okay yeah is it part of the game or is bribe even the correct word here with all of the negative connotation so if i said that a protocol was using its own native token to incentivize

liquidity would that sound bad no no i would also it doesn't have the same ring it isn't the same ring to it as bribery and you know bribery is effective it works we all know what it means i think it's used a bit tongue-in-cheek but um like what's the ethical issue that you would see with the way that this is happening i'm not sure it's actually just that the term bribe that i'm not comfortable with let me ask you are there ethical issues are there corruption issues are there issues of some um nefarious token trying to get liquidity that doesn't deserve it and like buying its way into that liquidity or like is that is that a bad thing are there any you know hazards moral hazards that they come about as a result of this

that's a good question i am struggling to think of it but i am not uh among my many accomplishments i'm by no means an ephesus so so there's this website that has been a spun up uh vodium that i think has formally instantiated bribery uh in the curve ecosystem uh and so i kind of want to uh ryan if you could there we go uh so okay this is kind of the end game i think of the curve wars this is kind of where things have landed um what what are people doing here just take us take us through what are people doing when they are bribing here and why are they doing that we might already cover this no this is you're absolutely right this is this is where the activity all flows

onto so if you take your convex tokens and you lock your convex tokens it's only a 16-week lock so it's not quite as severe as that four-year curve lock and then on this site vodium you could use that vote-locked convex to vote for which pools are going to receive rewards and then also if you're a protocol you can directly issue a bribe here on this site so that people can go in and um people can go in and vote for the protocol that they think is best now all the bribes are shared by everyone who votes for it so if someone goes in and places a one million dollar bribe and you're the only person that votes for it then you would get that entire million dollars for yourself uh so as a result

it tends to equalize out a little bit between the pools and if you'd like to see um if you'd like to see some stats on this i would suggest going to the llama air force site that's lama dot air force llama like the little animal of course llama air force two l two obama ryan not the dalai lama i should have been more explicit thank you the lava air force is alphabetically alunara benny and fiddy who are incredible incredibly active in geniuses in terms of programming if you click on the vodium tab up there they have all sorts of stats for curve convex and you can see all the results of all the bribery rounds if you want to call it

that we're currently on round number 10 and as you can see frax has deposited nearly six million dollars worth of bribes and this is going to get distributed amongst everyone who votes for frax if you go and click on that drop down you can see the results of some of the previous weeks this one oh actually this one has concluded already two uh you can see the dollars per vote locked cvx means uh the amount of dollars you take home at the end of the day for uh if you voted for that and you could see that they tend to equalize out between all the different pools so because fracks bribed the most they got

the most votes and this is the mechanism by which it evened out before the bear market crash this is approaching nearly a dollar per vote lock convex that's incredible okay so i mean we could talk about that for a minute but it's like again we're using the term bride but really what these protocols are doing like what fracs is doing is it's just paying for liquidity isn't it just the way that's correct yeah buy liquidity from you know tokamak or you know some other service that's correct and if you don't want to bribe people you could buy a large stake in convex yourself and you could use that convex or you could buy a large shear of curve so there's a lot of ways you can go ahead and and vote or sorry there's a lot of ways you can influence the curve emissions the vodium angle is just one of many

so this is the end state of the curve wars uh i don't think it goes any further than this unless there's some sort of bribes for bribes but that seems like one fractal too far it might be i mean maybe someone's going to come up with some sort of lending protocol based on something within this uh the ingenuity in the space is what keeps me glued to my screen 24 7. very very cool uh gary there's a number of questions that that i have for you um there's like i want to know who's playing the game because there's a lot of whales that are playing the the the curve wars game and i just kind of want to know who's kind of who's won who's won the most and i also want to get into the topics of uh curve versus unit swap because there's always the conversation

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optimism arbitrarily or boba networks and we are back with garrett hall talking all about the curve wars which seems to have evolved into its logical conclusion and so gary i want to ask about the curve community because this is such a vibrant ecosystem of just like data and you know tokens and shenanigans that is of course it's attracted just a bunch of people around it so how would you characterize the curve community like who are the types of people that are really interested in the curve wars yeah so there's a number of ways to answer this because there's the protocols obviously we talked about their role and the curve wars they want to get their pools big

they want to maximize missions get a ton of liquidity um on the other side of this is just um all the people who are kind of downstream of this and receiving some of the cash that get thrown off in this uh protocol like let's be honest there's one thing that unites pretty much everybody in cryptocurrency and that's greed we're all extremely greedy uh kerb has been making people uh not only making people wealthy but they don't rug them in the process so anytime you see a site that's saying you know five million percent apy of course users throw money in they lose all their money and then they complain curve has been consistently delivering curve has been around for two years an incredible security track record so people feel

really safe and comfortable putting their money into curve and by extension convex podium the people in the community because you have to really be able to understand this you get a lot of really smart people so i tend to hang out mostly like the dev channels so i end up talking a lot with developers that are building really cool stuff on top of this um and i think that the kind of composability of all these uh various assets that curb is creating is just really bringing out some of the best ingenuity and innovation within all of d5 i think one of the biggest things i've taken away from this conversation is that curve has really won the game of decentralization it seems like this game that's being played has

created a long-term stable equilibrium of decentralization because we're talking about like the winner of the curve war is another protocol and that protocol is uh only giving out its its spoils to bribes then those are being browsed by other protocols so make when you peel back the layers are on this thing like is there tetranode under the hood just like winning at this game or like are there humans playing like winning at the curve wars or is it actually like a successful case of decentralization so i think it's a i happen to know the curve core team puts a lot of emphasis into decentralizing so amongst other things like the site is hosted on fleek

uh that can't be or are not through via ipfs so it can't be taken down um the there was a issue a few weeks ago that got a lot of attention uh where there was a protocol that was trying uh called mochi that was trying to basically like back door its way into cornering convex and it was shut down by something called the um curve emergency uh dao and what a lot of people don't realize is that the curve emergency dow is none of the core team it's nine other completely different protocol summer protocols and some are just very active community members that have like the sort of master key ability to shut down uh shut down things in case of issue so curve has no capability of doing that they completely decentralized that if a

um asteroid wiped out all of uh all of the very tragically wiped out all of the core core devs the protocol would live on amazing i i feel like that's just like sadly extremely unique in defy i can't name another protocol that has this property nor can i but i'm just an expert on curve okay fair enough um all right what's cool about this too is like um all of this stuff happens on chain like it's so transparent even even from the the mission schedule being able to forecast you know 300 years in the future of what the the curve token supply is going to be the fact that all

of these like the bribes are on change like everything is completely open and transparent and unchained i do feel like that is very much the the ethos of uh defy um i i'm curious one thing when we were talking before uh the sponsor break garrett about like the the value of a curve vote it was like 87 cents or something according to the llama the air force llama here um 87 cents per vote and i i've read some things uh like the little i've read about this um lately about convex itself and the value of convex and there seems to be some idea within the community and of course you know bankless never provides financial advice none of this is financial advice but uh i've read a lot about um

like the valuation of of convex uh you can value it very much like a a stock a stock that is throwing off dividends and when you look at the value of a curve vote it looks like the convex token itself is tremendously undervalued do you have any insights on that or like what is the community saying about convex uh and its relative valuation so i think that the thing that like when i mentioned the kind of the core ingredients of the curve token is there's the governments and then there's the cash flow there's sort of an implicit third which sort of every protocol or every kind of has which is this sort of multiplier effect

which is factoring in hypothetically things that might come in the future and like by way of example on this convex uh if you want to just value it based on this vodium uh the flywheel the cache is currently throwing off you would have missed for example that convex recently is not just going to be doing this uh convex magic uh sprinkling this magic pixie dust on curve uh they're also expanding to fracs so frax has a ve fxs vote escrowed uh frax chair that they announced they're basically moving their entire tokenomics to the ve crv model and convex announced that they're going to pull them in their fold so this is all of a sudden a second major massive protocol in d5 that's

going to be getting convex how many protocols have you seen lately adopting this ve tokenomics model what percent of those might end up under the convex uh under this convex umbrella what is the the ve token model itself because that does seem to be something that uh a lot of protocols are you know uh switching to are considering or taking a look at is that just basically locking up um locking up your tokens in the way that that curve has in sort of this um yeah the the staking type arrangement where you are able to receive token rewards and uh potentially dividends so i don't think that this is just a copycat or a hype thing um and it's

actually funny because at the beginning this ve tokenomics was mocked mercilessly but now it's kind of getting the last laugh here why were people mocking it uh the four year lock is too much uh you know the it's too complicated it's too confusing no one's going to use it but nowadays we're seeing protocols not just really copying it but tailoring it to their own needs because protocols all have their own issues to deal with and they might need a slightly different implementation of it so if you look at the way that some of these different protocols are moving to adopt the ve tokenomics they they are kind of moving in this way that would be compatible because once you have a ve token that controls governance rights you can get it in the convex

ecosystem but it's not always the case that um that it's good for everyone to adopt uh ve tokenomics like i think that if you have a cash flow for example uh where you're able to return fees to users in a substantial amount i think it might work if you don't have that i'm not sure if the ve tokenomics is something that your protocol should necessarily adopt here i want to open up the worm uh can of worms which is uniswap v3 versus curve because curve really this whole entire game and the whole entire valuation of the crv token and also the convex token is all dependent on a stable coin volume

and if stable coin volume decided for some reason to migrate away from curve uh then that would be bad for a cascade of all the relevant tokens that extract value from the trading fees going through curve and so in a world where unit swap v3 actually becomes more efficient for stable coins that would be really bad news for curve do you think there's a future version of the world where uniswap v3 eats curves lunch well i don't necessarily think that because i really think that the past few years curve got this level of dominance through the stable coin swaps but it's the curve v2 pools that are i think going to be ending things we haven't

gotten a chance to talk much about the curve v2 but it really is a seismic innovation so uh essentially occur the curve v2 pools allow for uh our pools that contain volatilely priced assets the first such pool that was released was essentially a pool that had us tether wbtc and w eth the pool is able to rebalance itself without the aid of an external oracle so just by understanding internally the trading volume that's happening within the pool it's able to determine what it believes the current price of bitcoin and ethereum actually is and it's able to rebalance itself towards that taking

profit along the way and what we've seen uh this pool was launched in the summer of last year um this past few weeks was obviously some major bear activity a lot of amms were unable to really accommodate the kind of massively fluctuating change in price tricrypto2 was rebalancing itself in your real time and was one of the only sources of available liquidity if you needed to move uh real at in the absolute swing of things between bitcoin and ethereum for example wow wow okay so one of the big drawbacks about uniswap v3 was that you you can provide liquidity in a concentrated form which is one of the perks but then if

the uh if the unit swap markets for that particular trading pair moved outside of that concentration so you know here's the concentration then it moves outside of it then all of a sudden all the liquidity is gone and people would have to withdraw their liquidity and then redeposit it based on new parameters and you're telling me that curve v2 does the same sort of phenomenon but in an automated auto rebalancing fashion yes wow also the other thing about uniswap v3 is it's it's very much uh rewards more active liquidity providers right like you always have to be playing the game you have to monitor it you also have to have opinions as to the future of the price as well totally it's got its opinionated liquidity yeah but

but with these v2 pools for something like this try crypto 2 which is you know tether bitcoin and eth that's pretty passive i would i would suppose like you don't have to play the active liquidity um provider sort of role as you do in uniswap right so i'm a poor person and i can't afford to kind of constantly be rebalancing my position but i can put some money into try crypto and the only slight drawback to it is that there is in per uh impermanent loss because of course if the prices change the balance has changed and you might be withdrawing a different amount but then the upside is uh the upside is that you well first of all a lot of

these pools are getting the curve rewards on top of it um you can somewhat time your trades on that so for example now would be a really good time to put dollars into the tri-crypto pool because then if the price of ethereum and bitcoin go up then you'll be able to pull out in theory more ethereum and more bitcoin and it's not like uniswap v3 would have protected you against impermanent loss either right no no that's that that's something that if someone solves that you know i'd like to i'd like to see how right uh so is curve v2 gonna eat unit swap v3s lunch i would uh yeah i can't comment on unit swap necessarily a lot a lot of people are trying to push this battle between curve and uniswap and i think it's a

little bit forced um because for example like it's been this battle uh has been kind of pushed there for a long time uh but the more amms that we have out there isn't that the best for d5 absolutely i think people just like watching the the money robots beat each other up like battlebox yeah a little battlebot session here and there it's kind of fun curve v2 have an internal accurate price oracle on chain is curve going to eat chain wink no probably not right and we would never say that by the way frogs any frogs that are listening don't come cancel us i'm tired of you guys i guess that is the main difference between unit swap v3 and curve v2 is that curve v2 depends on an oracle and

unswap v3 doesn't is that correct yeah yeah okay um straight off i'm sorry you say curve does not well i was i was curious about these v2 pools what other sorts of things could you put in them like uh we're putting together bitcoin and ethan one but um it probably doesn't work with like it does is it still kind of like kind sort of assets or can you throw anything you can put anything in it so just last week curve launched the v2 factory and anybody can go on that and launch their own pool between any two tokens that they like

uh so far about uh half dozen of these pools have been launched so we've seen a lot of pools with eth and some other defy asset uh badger which as you saw as a big player in the convex wars is uh created a badger bitcoin pool and then there's been a few dollar pools uh created like dollar plus some other asset that's cool garrett it's going to open up a lot of routing options because this means that with the more pools of these that get launched the more that you can move high volume low slippage between any assets in d5 let me guess if i open up the curve v2 white paper it's just an insane amount of crazy math it's math

this one is like above university level math it's really complicated wow i'll be looking at that right after this podcast oh yeah some late night reading the easiest part to understand is it uses an exponential moving average to keep track of the oracle price okay okay i i'm also curious i don't know if you have a perspective on on this garrett but while we have you and you you're thinking about curve a lot um what is it like migrating from ethereum main chain i've noticed curve being deployed on like in polygon i'm not sure if it's on uh some layer twos right now like arbitrarium i believe that maybe happened recently i can't keep up with it but um

does that break the liquidity of curve or how do you see it evolving beyond just ethereum may net onto some of these layer twos and other chains so kerb is currently on eight different chains and this is just um just you know as a quick aside that's so good for like the people who aren't whales because the ability to kind of get access to this flywheel to economics outside of ethereum is really helpful for a lot of people and there's actually a few other ways that people who aren't whales can even on ethereum main chain uh still participate uh but on the subject of the side chains i curve has done a really good job of trying to keep its architecture uh

easily launchable on any evm compatible chain and that's allowed it to kind of move very quickly between it uh a lot of the bribes can be done towards uh pools on other chains and some of the mechanics are not yet fully built out but are being built out as we speak to kind of allow for kind of more and more cross-chain compatibility garrett this has been i think one of the most interesting and educational state of the nations that we have ever done so thank you for coming on and explaining the curve wars to us in such a digestible way there's two last things i think we need to get in through on this episode and uh both of them have to deal with you and one is your pack your pac.xyz can you for our listeners explain what pac.xyz is

yeah absolutely and um you know it's while we're on the subject of uniswap that i think is actually like a kind of real timely thing to talk about because could you imagine if uniswap wasn't headquartered in the united states if it was headquartered in another country they'd be throwing the founder a parade and instead the united states they're unbanking him or making him bankless like it's just insane what's been going on it's not in a good way yeah yeah this is literally for people who aren't following uh this is literally i think this happened a week ago like uh they they canceled they uh hayden adams the founder of uniswap they booted him from his from his jp morgan say the names yeah jpmorgan chase canceled adams jamie diamond cancel hayden adams bank

account i'm cutting up my chase card right now just this whole thing is madness one of the things that got me into stable coins in the first place is i said oh this is probably a fairly safe place to be because stable coins um if like it's i've heard it described as like an iq test for the national government a rational government would be embracing this we have a huge lead every defined asset is denominated in dollars and instead we're attacking it does that make any sense to you no it makes no sense to me whatsoever so tell us about pack how are you so i've been so frustrated with what's going on in washington dc that i just

sort of floated this idea of could we get some on-chain cryptocurrency advocacy going because the crypto community is wealthy and you can buy house races for less than people are buying jpegs for wait braves is that where you're going back to price again well thankfully thankfully the pac community has a ton of lawyers and figured out how to make my wild ambitions like pass the legal test okay and um they've come across a number of mechanisms that we can use to be able to affect change within congress and one of the most important things we've launched already is this on-chain congressional scorecard so we are allowing anybody with a wallet to come in and vote for whoever they think is

the best or the worst and yeah no surprise elizabeth warren is a negative 4.91 out of five oh wow she's ahead of brad sherman at this point it's pretty bad it's a very close race but um the flip side of it is if you sort the other way you can see that there actually is a lot of people that are doing a lot to uh help out cryptocurrency tom emmer at the top he's coming on the podcast by the way show the podcast when's he coming on david in february uh sometime in february yeah yeah okay sorry it continues yeah no this is um this is great because i think that as a community we can actually affect some change in washington because there's only two things that move politicians one is votes and the other is money and cryptocurrency is getting there in terms

of votes but we certainly have the money so if there's a if we are not getting our message out to congress then that's our fault um but we're starting to get the uh starting to get the raw mechanics there so this is one of the many initiatives that we're working on with uh pak dao uh we're working on wherever we can apply on chain crypto activism and use this to uh to best influence congress well said so gary can how can people get involved in this if i'm a regular you know kind of crypto user can i just connect my uh wallet and vote for some of these representatives is that one way to get involved what are the other yes you can uh join our discord our discord's very active we have community calls every friday uh we talk about the initiatives

that we're currently working on so um i can't quite get into all the initiatives just because we it's already uh getting close to our uh close time here another one i'd be happy to come back or we can get someone else from the community talk about it because um there's just a lot of work that needs to be done we need to need to need to recruit primary challengers for all the people who are the most hostile towards cryptocurrency because let's take a look at them again this is the wall of shame right here one more so elizabeth warren now leaves up for vote this year but brad sherman actually has an incredible competitor in erica rhodes i think she's going to pull it off so we had her on the podcast big fan yeah i listened to it it was a really

really good um sherrod brown of course was chairing the stablecoin um committee uh he's not up for a little bit but uh steven lynch is a representative reps are up every two years so we could get we could get pro cryptocurrency challenges for all these people the primary race is what matters once they get through the primary they don't feel the heat and the primaries are coming up now all right so so join the discord join the discord uh go ahead and connect uh on the site and vote and uh follow up pack down on twitter and we will get all of those links into the show notes for the listeners if they're not already there garrett thank you so much for coming and just giving us so much education again with curve and also for fighting the fight in washington because

it's such an important fight um i'm in the i'm in the wrong washington for the fight but true fair fair enough um uh gary if people want to learn more about you follow your sub stack and just see what you're up to where can they go it's curved.substack.com or follow on twitter curvedcap lovely there you go thanks garrett this has been fantastic bankless listeners hope you enjoyed uh the 300-year curve war may already be over convex may have already won we're not so sure but uh it's really cool to see how this plays out and i bet it will be full of surprises in the months and years to come of course risks and disclaimers none of this has been financial advice not at all ethan's risky curve is risky

d5 is super risky you could lose what you put in but we are headed west this is the frontier it's not for everyone but we're glad you're with us on the bankless journey thanks a lot hey we hope you enjoyed the video if you did head over to bankless hq right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence we recommend joining our daily newsletter podcast and community as a bankless premium subscriber to get the most out of your bankless experience you'll get access to our market analysis our alpha leaks and exclusive content and even the bankless token for airdrops raffles and unlocks if you're interested in crypto the bankless community is where you want to be click the link in

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