89 - A New Era for DeFi | Scoopy Truples of Alchemix

Scoopy Truples from Alchemix returns to Bankless to update us on what lies ahead for the protocol, and more broadly, the DeFi ecosystem. Alchemix v2 is on the horizon, which will allow for much more composability and integration with the rest of DeFi, as well as introducing new means of collateral such as LUSD and MIM. Scoopy also details plans for Layer 2 and Cross-Chain launches. The second half of the conversation turns to DeFi 2.0, which Scoopy outlined in this epic twitter thread. This new generation of DeFi projects introduce a new primitive for bootstrapping liquidity and capital to a protocol, which traditionally has been achieved via incentivized liquidity pools. This new model allows protocols to purchase LP positions and accrue value more sustainably, discouraging mercenary capital that leaves when rewards taper off. Scoopy brings big ideas and digestible explanations to this complicated topic, contextualizing what may become a new era for DeFi. ***** 📣 POOLTOGETHER | DEFI LOTTERY https://bankless.cc/PoolTogether ***** 🚀 SUBSCRIBE TO NEWSLETTER: https://newsletter.banklesshq.com/ 🎙️ SUBSCRIBE TO PODCAST: http://podcast.banklesshq.com/ ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🍵 MATCHA | DECENTRALIZED EXCHANGE AGGREGATOR https://bankless.cc/Matcha 🔐 LEDGER | SECURE YOUR ASSETS https://bankless.cc/Ledger 🧙‍♀️ ALCHEMIX | SELF-PAYING LOANS http://bankless.cc/Alchemix ------ Topics Covered: 0:00 Intro 3:30 Scoopy Truples & Alchemix v2 8:02 Optimizing Yield 13:03 Community & alETH Vault 21:23 Layer 2 & Cross-Chain 29:58 Governance & Participation 37:00 DeFi 2.0 and Olympus DAO 49:16 How it Works 54:39 Flushing out Toxic Liquidity 58:24 Adopting this Primitive 1:01:23 Tokemak 1:03:54 Closing & Disclaimers ------ Resources: Scoopy on Twitter: https://twitter.com/scupytrooples?s=20 Scoopy’s DeFi 2.0 Thread https://twitter.com/scupytrooples/status/1447398430574141445?s=20 Alchemix Links: - Twitter: https://twitter.com/AlchemixFi?s=20 - Discord: https://discord.com/invite/alchemix - Website: https://alchemix.fi/ ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://newsletter.banklesshq.com/p/bankless-disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:07David Hoffman?

  Hey Bankless Nation, welcome to this special edition of the Bankless Podcast. Today, I'm talking with Scoopy Truples of the Alchemix Protocol. We had Scoopy on a while ago on the State of the Nation to talk all about Alchemix Fee 1 and also the new ETH vaults that were coming online shortly thereafter. And today, we are getting an update as to the state of the Alchemix ecosystem, the story of the Al ETH vaults and what happened with that, and also the story of the coming V2 of Alchemix, as well as their Layer 2 plans. And then I also pick Scoopy's brain with what he is calling a "new era for DeFi", which is using Olympus DAO's primitive to replace the traditional yield farming mechanism,

• 0:51David Hoffman?

  where you just deposit your liquidity into a contract, and then you receive the governance tokens as a reward for depositing your liquidity. Scoopy thinks that the time of that model for yield farming has come to an end and is going to be replaced by something much more sustainable, much more long-term aligned. And so, we go into the details of that as well. So, I hope you enjoy this update as to the state of Alchemix V2, as well as Scoopy's brain with regards to what's going on in DeFi. And so, we're going to go ahead and get right into that conversation. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Matcha, everyone's favorite Decks aggregator, has just launched an open beta for gasless trading.

• 1:32David Hoffman?

  So, if you're trading more than $5,000 in common ETH and wrapped Bitcoin pairs, then your gas fees on Matcha are free. And that's why you should be using Matcha. Matcha routes your orders across all the various DeFi exchanges on Ethereum, Polygon, Binance Smart Chain, and gives you the best possible price without any trading fees or unnecessary slippage. Matcha has smart order routing that splits your orders across multiple liquidity sources if Matcha sees that that gets you better pricing. Trading on Matcha is super easy because it pooled the liquidity for me into a single and easy-to-use platform, and has even saved me multiple times from accidentally picking the wrong deck. To trade on and getting a bad price. Matcha also allows you to make limit orders on chain.

• 2:14David Hoffman?

  So you can set and forget your DeFi trades and they will go through automatically while you're away. So when you're making a trade, head over to matcha.xyz slash bankless, connect your wallet and start getting some of the best prices and most liquidity when you trade your crypto assets. Alchemix is one of the coolest new DeFi apps on the scene. It introduces self paying loans, allowing you to spend and save at the same time. Deposit the dye stablecoin into the Alchemix vault in order to get an advance on the interest it generates. Borrow up to 50% of the total amount of your deposited dye in the form of Al USD stablecoin. Here's the craziest part, the loan pays itself back and you cannot be liquidated.

• 2:59David Hoffman?

  Unlock your assets potential in the ultimate DeFi savings account. And brand new to Alchemix is the ETH vault where you can deposit ETH into the application, borrow Al ETH against your deposits while having your advance gradually paid back over time. V2 is rapidly approaching, which will allow for even more collateral types, plus a variety of yield strategies to choose from. Harness the power of Alchemix at alchemix.fi. That's A L C H E M I X dot F I. Follow Alchemix on Twitter at @AlchemixFI and join the Discord to keep up to date with Alchemix V2 and to get involved in governance.

• 3:40David Hoffman?

  All right, Bankless Nation, today we are here with Scoopy Triples of the Alchemix Protocol. Scoopy Triples, in addition to having one of the coolest and most fun names to say in all of crypto Twitter, it has been with Alchemix since day one and has co-founded it. And Alchemix has really just planted its flag with one of the cool new DeFi primitives that the rest of DeFi hooks into. So Scoopy Triples, welcome back to Bankless.

• 4:07Speaker 01

  Yeah, it's great to be back, man. I'm really pumped to be here and, you know, talk about Alchemix and sort of like, you know, just DeFi in general, man. Thanks for having me on.

• 4:17David Hoffman?

  Yeah, so the last time we had you on, it was during Alchemix's V1 days and not yet getting into the world of V2. But yet now Alchemix is in its V2. So Scoopy, can you tell us the upgrade from V1 to V2 and where Alchemix is now?

• 4:34Speaker 01

  Oh, let me issue a little correction. We're not done with V2 just yet. It just entered Code Freeze and it's going to go into its audit at the end of the month. And, you know, hopefully, we will be able to get that out by the end of the year. If not, then, you know, very early next year, we'll be having V2 out.

• 4:54David Hoffman?

  Fantastic. So what are the big upgrades that V2 is bringing along?

• 4:58Speaker 01

  So in V1, we only have one collateral type, and that's DAI. And that means AlUSD. And same thing with ETH, that means AlETH. And we only have one strategy, that's Yearn for both of those. In version 2 of Alchemics, we are just going to blow open the doors for what we're going to be able to do. Multi-collateral AlUSD, so, you know, lots of new stablecoin collaterals are going to be collateral for AlUSD. So you could think of like, you know, sort of like the big ones, so DAI, USDC, Tether. But also, like, a lot of the new decentralized stablecoins. In this past year, a bunch of really new, like, really high-quality decentralized stablecoins have come out.

• 5:40Speaker 01

  I'd say most notably, LUSD and Magic Internet Money. And I think adding those to the mix and also some of the other, like, kind of up-and-coming decentralized stablecoins is going to really, you know, you know, bring, like, make Alchemix a big tent for lots of different assets in the space.

• 6:02David Hoffman?

  Very cool. That is, we like it in the world of DeFi where things open up. So is each one of these stablecoins going to have their own vault? Or is it going to be all collapsed into one or a few vaults? Or collateral is going to be mixed together, or are they going to be siloed?

• 6:18Speaker 01

  So the collaterals are all going to kind of work together to be a big composite position for you.

• 6:25Speaker 01

  And then, so like, let's say you just have, you know, it's split between three different collateral types. And let's say, you know, you have a thousand bucks in there, you'll be able to borrow 500 AlUSD off of that. Regardless of how much you have in either one of them, it'll work all seamlessly together. And I think one of the cooler things about this is that not only are we having multi-collateral AlUSD and Alith as well, but also multi-strategy. So inside of each collateral type, we'll be offering an ever-growing selection of strategies. Think about all the different yield aggregators. So right now it's just yearn, but we're going to be adding Ave. We're going to be adding Compound. We're going to be adding Pickle, Harvest, Stake Dow,

• 7:09Speaker 01

  and more to come because I know there's going to be some more innovations in the yield aggregator space as well. So and the cool thing is you can, you don't have to go all in on one strategy. You can mix it up however you want to. So if you want to go like half in yearn, half in stakeout, you can do that. You can make it whatever composition you want. So it ends up being kind of like a meta-yield aggregator that you can sort of build to your own risk tolerances. And but let's say like, you know, one of the underlying strategies like, you know, suffers a black swan event. Your collateral and other strategies are fine. You're only going to take that loss in that one strategy.

• 7:50Speaker 01

  So it's really going to be you kind of parameterizing your own risk tolerance in addition to your yield preferences and stuff like that. So it's going to be really, really powerful.

• 8:02David Hoffman?

  Okay, so this isn't, I don't, if it, correct me if I'm wrong, but because of V2, you're not going to be getting more yield than you previously would have. The big unlock, the big innovation is being able to more finely tune what you are exposed to, the risks that you're exposed to. Is that correct?

• 8:22Speaker 01

  Yes, but also since you're going to have different yield providers to choose from, you could end up having higher yields than what yearn is presently offering.

• 8:32David Hoffman?

  Okay.

• 8:32Speaker 01

  Yeah, because different yield aggregators use different strategies, you know, so there are going to be some differences in that. We're also really looking into taking sort of like curve LPs, like the ones that are made up of stablecoin positions. And, you know, like going into convex, which is like a really awesome, you know, platform for curve LPs is going to also like increase the amount of yield that our users are going to be able to have in Alchemix V2. So we're expecting, yeah, yield to go up, you know, choice to go up and, you know, people being able to sort of choose their own spectrum of, you know, risk involved in Alchemix.

• 9:13David Hoffman?

  Okay, so one of the questions I had when you talked about having like multi-collateral LUSD where you can have like DAI or LUSD as the deposit. My mind went to, well, what about having a stablecoin curve LP position where you're LPing a bunch of stablecoins into Curve? And using that as the deposit, like, can you do that? Or is that nonsense?

• 9:36Speaker 01

  Yeah, that's what I just, yeah, that's what I just said. So those, those curve LP positions, they're really cool because they work as a composite of all of the tokens that are underlying. But they also have a sort of thing about like number go up about them because the trading fees from Curve end up going to the LP token. So LP tokens' underlying value, you know, tends to go up and to the right gradually over time. So, you know, of course, not all the LP tokens are made equal. We have to do a lot of risk parameterization to see which ones are acceptable as collateral. But I think that, you know, they are going to be a very good addition to Alchemix and we can accept, you know, a lot of that, for sure.

• 10:16David Hoffman?

  I would imagine as a yield optimization protocol, having your collateral be curve LP positions and then also being able to borrow more stablecoins to go yield farm even more. That seems to be just like an insane amount of yield.

• 10:32Speaker 01

  Yeah, it's just going to be yield, you know, all day and all night. Yeah. We're excited for it.

• 10:39David Hoffman?

  Okay, so Alchemix has now integrated into more yield-bearing strategies and is also integrated into more stable coins. But what about protocols that have integrated more into Alchemix? Can you talk about how you guys have been coming, becoming adopted in the greater DeFi ecosystem?

• 10:57Speaker 01

  So in version one, there is no real greater adoption for other protocols going into Alchemix. We, as a security measure, because, you know, we really wanted to make sure everything was as safe as possible. We did not allow for smart contracts to interact with Alchemix, and that would prevent flash loans and other, you know, exploits associated with them. But our version two is being audited by one of the best firms in the business, Runtime Verification. And we were designing V2 with them all summer long with security in mind, and it's going into audit with them. It's going to pass through like formal verification and, you know, lots and lots and lots of testing. And so we're going to be able to

• 11:38Speaker 01

  make version two a lot more composable, where any, you know, person, any application, any DAO can plug into Alchemix and use it for themselves.

• 11:49David Hoffman?

  So this really seems to be Alchemix's stepping into the wild moment, where you are fully unleashing, allowing the powers of DeFi to get integrated, which is like a double-edged sword, right? Like, well, if you become more and more permissionless, well, you get more and more used. But also, if you become more and more permissionless, you increase your surface area for exploits. So this seems like Alchemix is, we're ready for the wild. We're ready for the risks moment. We think we're, we think we've got this, and with this protocol is locked down, and we're ready for the integrations. Is that, is that the right vibe?

• 12:25Speaker 01

  Yeah, totally. I think like when new protocols launch, V1 is always sort of like, like, really like glorified beta, where we have to cut features and you have to sort of like do things in order to just ship and get your product out. And then V2 is really like kind of the vision that you had originally for your V1. And then I think it was a T11S from Twitter. He's like, so then what's, you know, V3? And then V3 is actually the true V2, right? So I don't know. I don't know when V3 is coming out. Don't ask me, please, for the love of God. But I am super excited for V2. Yes.

• 13:02David Hoffman?

  Well, congratulations for making it all this way. And I think one of the biggest strengths that Alchemix has is its community, which I think is evidenced by what happened when there was the accidental exploit of the ETH faults, which is why I thought you guys were at V2, because I thought the ETH faults, we were V2 at the very beginning. That's, that's how I got that mixed up. So Scooby, can you tell us the story of the ETH faults and the resulting rallying of the community behind it?

• 13:32Speaker 01

  Yeah. So when like we launched our alley fault, like, you know, we were really confident that it was secure. It was passing all of our internal tests and everything like that. But there was a weird thing that happened in the deploy sequence, where one of the vault adapters that handles, you know, moving your, your ETH collateral to yearn, it failed its deployment two times, but there was no error message involved. And so the vault that finally got deployed was at the wrong index number than we anticipated. But it was at the same address and we didn't have a sanity check because we didn't think that could happen. And so when we called pool ID zero to harvest the yield from it,

• 14:15Speaker 01

  it read that there was a balance of nothing supposed to be in there. But then it saw there was all this ETH in there, thinking that this was profit. And then it used all of that ETH to then repay everyone's debt erroneously. And so then people were free to just like withdraw their collateral and have this free alley at that time. And a lot of people like, you know, obviously were like really distraught that this had happened. And we're kind of scrambling, what are we going to do? And then a lot of people in our Discord spoke up as like, hey, I got free stuff. Can I give it back? Where should I send it? And then it dawned on us, hey, what if we just ask nicely? And it ended up being really successful. A lot of people in the community gave it back.

• 15:00Speaker 01

  I think it was over 200 wallets gave ETH back and a lot more people donated. We finally made good on our promise and we made a patron NFT that has metadata for how much ETH people donated back to Alchemix. And that will have some functionality in some future apps that we have.

• 15:21David Hoffman?

  Very neat. Do you know how much total ETH was lost and then how, what percentage of that ETH was recovered?

• 15:28Speaker 01

  Yeah, there was around 2,300 ETH that was lost and we got a little bit over 50% back. Some of that was, you know, our team members kind of rallying together and making donations of our own as well, in addition to the community. So I'd say like minus that we were under half, but you know, still even then it was, you know, a very awesome thing to see our community come together.

• 15:55David Hoffman?

  Right. It's kind of even weird to think that like you got anything back at all? Like people got free ETH, why would they give it back to you? And so like what lessons or what takeaways do you have by the fact that so many people gave any back, anything back at all? Like what are your big takeaways about what this tells you about, and maybe the Alchemix community or maybe DeFi at large?

• 16:18Speaker 01

  Well, I mean, I think it speaks to the larger Ethereum community. You know, when, if you, you know, foster a good community and, you know, people think you're a good actor in the community, then they want to do good by you. And I think we see that a lot in Ethereum, not with everybody in the space, but you know, probably more than any other blockchain in the space. You see a lot of good actors and good people in Ethereum in general. Another thing is that, you know, we asked nicely, you know, we took calls with our community. We spent time, all that time before launching Ally, it's really trying to grow and foster our community and have it be a nice, friendly, welcoming place for people. So we got the right people into the application. So I think that's part of it.

• 17:00Speaker 01

  You really, you know, in crypto, you know, you can fork any project out there, you know, the, even if the code isn't public on GitHub, you can pull it off the blockchain, reverse engineer and deploy it yourself. It's, it's, you know, anybody, you know, who's a decent coder can do that. But You can't fork a community and that's something that we really, really learned with Alith and we love our community and you know, and are so grateful that you know, we were able to recover so much of the funds in that incident.

• 17:29David Hoffman?

  How much do you think the NFT had to do with that recovery?

• 17:33Speaker 01

  That's a really hard one to say. I think we ended up getting around like a couple hundred ETH returned or just donated to us because people felt bad for us and you know, small donations and stuff like that. And that's including, you know, some of our team members, you know, giving back and just trying to support our protocol as well. But yeah, like it was really big, you know, and I think when you kind of offer somebody a little, a little carrot, it's a lot better than a stick for sure. Like if we went out, you know, and you know, we're threatening people to give it back, I think we would have gotten almost nothing.

• 18:15David Hoffman?

  So that brings me to my next question. Not too long ago, a kind of similar-ish thing happened to Compound where a comp token was issued way faster than it should have been. And then Robert Leschner famously tweets out, anyone that got comp tokens that they shouldn't have, either return it or basically threaten to dox people that got this token to the IRS, saying like, hey, we will report your tokens as income. When you saw that tweet out of Robert, what did you think?

• 18:48Speaker 01

  Well, I disagree with the fact that he was threatening to dox people personally. I think he was more stating the fact that, you know, if you're trading on Coinbase, then they know who you are, you know, and therefore Coinbase will dox you to the IRS, not him personally.

• 19:04David Hoffman?

  Yeah, correct.

• 19:04Speaker 01

  And I mean, I think when he said that, he was probably under a lot of duress, a lot of pressure, you know, had probably people, you know, trolling him, flooding him, probably up for 24 hours straight because I was there at the same time, you know, and I wanted to pull my hair out. And when we're tired and we're stressed, we don't make the best decisions sometimes. So I'm really willing to give Robert a pass on that one because I know the guy and he's a great guy. And you know, I want to stick together with my DeFi brethren and founders because, you know, being on the other side, you know, people who are not involved in projects, they don't know how tough it can be sometimes, you know, and the pressures and, you know,

• 19:48Speaker 01

  like trying to work with it in this 24/7 industry. I mean, I kind of understand why bankers, you know, and Wall Street keep the hours that they do, you know, it helps them keep their own sanity and, you know, and that's something that I think, you know, all the builders in DeFi, you know, we try our best, you know, to do good by the community, to build and, you know, to do the best that we can. But, you know, we're all people at the end of the day, too. So we're gonna slip up, we're gonna mess up, you know, at times. So.

• 20:19David Hoffman?

  Yeah, no, I totally agree with that take. And even Robert, like, followed up that in that tweet, it's like, oh, yeah, guys, that was a boneheaded tweet. Sorry about that. But, yeah, everyone's just trying to do the right thing, the thing they feel is right. It's just an interesting little dynamic in DeFi that some of these things happen and then people go to crypto Twitter to see the drama. Go ahead.

• 20:41Speaker 01

  I remember before I was a founder and when like, you know, a hack happened or something spicy happened, I'd weigh in with my hot take, you know, and, you know, fudge something and, you know, get all the engagement from it. And it felt good to get that engagement. But then, like, I started realizing that that kind of stuff, like, while it is like a little, like, you know, growth hack for your Twitter account, like, you know, it kind of just makes you a dick.

• 21:04David Hoffman?

  Yeah.

• 21:05Speaker 01

  Like, and like, especially being on the other side, like, I don't want to do that. I want to be, you know, you know, of course, if there's a really bad actor in this space, call them out. But for the people who are out there and they just messed up or something like that, you know, I have no interest in, you know, going after those people anymore.

• 21:22David Hoffman?

  Totally, totally. So Scoopy, we are hopefully at the cusp of a massive migration to Layer 2. Does Alchemix have any Layer 2 plans?

• 21:33Speaker 01

  Yeah, so we now have had five forks of Alchemix at this point in time. And we realize that, you know, if we don't go and cross the Chasm to Layer 2s and other chains, and other people will do it and fork our protocol over there. So definitely, we are looking to go to Arbitrum and Polygon. They're the most Ethereum-aligned, you know, Layer 2s and sidechains out there. But we're also open to what the community wants in Alchemix.

• 22:11Speaker 01

  And if that is Avalanche, if that is Phantom, if that is a BSC or Solana, or one of these other, you know, kind of like new and I would say viable sidechains, then I think that it's worth considering for us to do so.

• 22:28David Hoffman?

  Have you noticed any desire out of the... And first off, am I pronouncing it incorrectly when I say Alchemix? And because you're saying Alchemix, is one of those correct?

• 22:37Speaker 01

  Um, I like to say Alchemix. I did come up with the term, but if you say Alchemix, that's fine, too. We have, you know, people from like all over the world on our team, and everyone on the team says it differently, so it doesn't bother me. I didn't even notice you were saying it differently than I was, so.

• 22:55David Hoffman?

  Okay, in that case, I'll stick with Alchemix then. So yeah, is there any alignment or community coherence about having Alchemix being deployed on a non-Ethereum Layer 1?

• 23:07Speaker 01

  Yeah, there's been some debate in our Discord. Somebody just was talking about the recent podcast that you did with Rune from Maker Dow, and a lot of the points that he made. And I've given it, I've almost listened to the whole thing, and I think Rune makes a lot of good points, especially with the fact that, you know, like, bridges are what they are right now, which is sort of a glorified multi-sig. But I also see that there's a lot of like innovations being made in the bridging space, and I'm really, really... Excited about Connect. And for full disclosure, as a part of eGirl Capital, we did do a round with Connect.

• 23:51David Hoffman?

  So I also am in that round, so full disclosure there as well.

• 23:55Speaker 01

  Yes, and I think that's going to bring, you know, a lot more security and trustlessness to, you know, bridging from, you know, one chain to another, because, you know, they have really awesome technology that lets you just send it from, you know, any EVM chain to any other EVM chain.

• 24:09David Hoffman?

  Right.

• 24:11David Hoffman?

  What about Rune's argument that like, his argument is that like, a lot of DeFi apps will have this incentive to deploy on everything that they can ever, all the L ones, regardless of EVM compatibility or not. But then he says that, well, if you have an Alchemix on Ethereum, and then you have an Alchemix on Solana, you actually, because you are doing the whole multi-chain strategy, you actually might generate sufficient network effects outside of your home base, which is Ethereum, that you actually might force a core migration of like your energies to a different chain. And that, and so Rune's argument is that, well, he, that's messy.

• 24:55David Hoffman?

  And so he's just going to stick to Ethereum and Ethereum only because he doesn't actually want to contribute energies to building on an Ethereum competitor. Because if that Ethereum competitor wins, then Maker has to do this messy migration to this new chain. Do you align with that argument at all? Or do you think that it's not entirely accurate?

• 25:15Speaker 01

  I could see that happening, you know, but I think as far as Alchemix goes, you know, the way that we're envisioning the way to deploy on other chains is that we would, instead of like giving minting keys for, you know, our L assets on other chains, we would do is kind of mint them on Layer 1 Ethereum and then bridge them over to other chains. And then just instead of like, you know, when you go to borrow LSD minting from the zero address, it would just

• 25:48Speaker 01

  You know, be, you know, taken from the actual contract itself would have a balance of the our assets there. And I think by doing that, we can still like have the security guarantees and ensure that Ethereum L1 is our hub. It's our main base. And if somebody wants to go from Polygon over to Avalanche or something like that, then they would have to go to Ethereum mainnet then over to the other, you know, to the other chain. So I, you know, definitely Ethereum is, you know, the most secure. It's the chain that I have the most philosophical alignment with by far, because they never sacrificed on decentralization, whereas other ones, you know, you know, even if they have a really cool consensus mechanism, a lot

• 26:33Speaker 01

  of times, it's kind of just like deposit at the end of the day.

• 26:36David Hoffman?

  Right.

• 26:37Speaker 01

  And I think Ethereum, you know, will manage to, you know, maintain, you know, their security and decentralization while also finding a way for scaling, whether that's through sharding in ETH2, but also rollups. And I actually think that if, you know, ZK Sync and/or Starkware really delivers with their EVM-compatible ZK rollups, then it's game over for all these other chains anyway, honestly. Like, why would you go there when you can have lightning-fast, super-cheap transactions with the full security of Ethereum? So, but, you know, that, that technology is still a little far away out. And if there's

• 27:18Speaker 01

  opportunities, if there's demand on other chains, I think, you know, it should be, you know, at least considered to go and expand over there.

• 27:27David Hoffman?

  So Rune's argument, you talked about how like if you guys don't deploy Alchemix contracts on a Layer 2, then somebody else will. And Rune's argument is kind of similar to, similar, but with other Layer 1s, right? And so you talked about how you actually don't need your minting contracts on a competitor, a Layer 1. You could just port the assets over there and that would be good enough. But then Rune's argument was like, okay, well, you can bridge your assets over, but then you just leave the opportunity for someone to just fork your code and add the minting contracts to that, that alternative Layer 1. And now you have a competitor there that's native towards that ecosystem where your assets are just bridged over there and are non-native. But what you're saying is you think that

• 28:13David Hoffman?

  The Connects Protocol, the I T X P or I X T P Protocol, the inter-interchain communication protocol, you think that that is sufficiently secure where that won't, the, the non-nativity of Alchemix assets on other Layer Ones don't, doesn't matter? Is that correct?

• 28:29Speaker 01

  Um, I, I don't, I haven't done like a super, super deep technical dive. And so I can't say without a shadow of a doubt if it's like as secure, you know, you know, a hundred percent secure or not. Um, but I know that the Connects team has been working on this for years and they have an awesome team. So I think if anybody can deliver, you know, a sufficiently trustless bridge, it's them. And yeah, that's where I feel on that. And I think like to kind of counter Rune's, um, opinion on this is that, you know, even if you are on L1, there are going to be other people who try to take your lunch anyway, even on that chain. I mean, look at, um, you know, LUSD, they're kind of going back to like the, the dive, uh, single

• 29:12Speaker 01

  collateral dive purity of just only ETH collateral. Then you have MIM with their ultra aggressive strategy for expansion, going across chains and using yield-bearing collaterals. And you also have like USDP, you know, you have, you know, there's, there's lots of competition even on L1. I think that's probably the place where the competition's the fiercest. And so like, I think a lot of, you know, you know, protocols that have a name for themselves on L1, when they go over to L2 or to a side chain, it's like a really big deal over there because they don't have sort of the, the legitimacy of some of these big names. And so when they go over there, you know, people are excited because, you know, it kind of brings legitimacy to their chain as well.

• 29:56David Hoffman?

  Uh, that's a really good take. Um, as we finish off the, uh, aspects of Alchemix, uh, I want to ask about, uh, governance and community with regards to, because you talked about Alchemix V2 and, and all of the technical updates that are coming along there. But there's always the issue of the community participation in governance and the state of the Discord. Uh, so how has the community rallied around Alchemix governments and, and what are those dynamics like? How, how have you guys tackled the governance problem?

• 30:26Speaker 01

  Um, I mean, I think we have a governance channel in our Discord and people like come up with ideas a lot. And we also have a governance forum. And before like I was kind of like the sole officer of the Dow, making proposals and you know, trying to get them through. But then recently I'm just like, hey, you know, this is a great idea. Why don't you write a proposal and telling that to people. And I think it's like of the last six proposals, only two of them were written by me and the rest were written by other community members. So it's really good to see the people in the community coming into the fold. Um, and writing proposals, um, you know, and getting active in governance.

• 31:07Speaker 01

  Um, and like going forward in V two, since it's going to be a lot more composable and people are going to be able to build apps on top of it. We want to get the community involved even more in like community development as well. Right now, you know, Alchemix V one doesn't have any extensibility to it. You can't compose apps with it, so it kind of cuts people off, but V two is not like that at all. And people have been expressing interest, so we're actually using or like kind of beta testing, uh, some, uh, some coordination tools internally. Uh, it's one is called coordinate. It's made by the urine team.

• 31:43David Hoffman?

  Yep.

• 31:44Speaker 01

  And basically the gist of this one is that you get a bunch of people together in an instance. And then, uh, you set like a time period, like maybe a month, maybe two months. And then you fund it saying, okay, there's, let's say there's $50,000 worth of rewards for here. Everybody in the instance gets a token called give. And then based on the amount of give tokens that they receive from others in the instance, it determines their payout.

• 32:09Speaker 01

  Uh, you know, so people will be posting up their, their get commits, you know, their other contributions, whether that's through education or marketing and things like that. People will see like what others are doing, um, and then give those tokens to them accordingly. And in order, I think they have a really cool tool that helps you visualize it too. That it's like, sort of like this graph, uh, that you can see who is giving tokens to who. So that way it's like, you know, some bad actors get in there and like try to make a cartel and game the system. You know, the, the admins in the system can just be like, yo, you're out of here.

• 32:40David Hoffman?

  Nice, nice.

• 32:41Speaker 01

  Yeah.

• 32:43David Hoffman?

  Community incentivization, I think, is how DAOs ultimately win. So where are you in the process of implementing that? Have you already had your first coordinate round finish?

• 32:57Speaker 01

  We're just beta testing, just like really small. It's not formal yet, but like we're trying to get the structures in place. Our team is crunching super hard right now on our V2 code.

• 33:08Speaker 01

  We're like, yeah, we're having code freeze either today or tomorrow. And then we are finishing up our testing and documentation suite for the remainder of the month. And then, once we have a little breather there, we are going to go full steam ahead and, you know, and really get the organization ready for more and more contributors to come in and work with us.

• 33:28David Hoffman?

  Right, yeah. Smart contracts are hard and also so is governance, right? So it makes sense to take those things one at a time. How big is the Alchemics team? And are you guys a formal, like, registered company? Or is it more of a loosely defined set of internet contributors?

• 33:47Speaker 01

  We are a loosely defined set of internet contributors, frog army, you know? And our team is, let me count now, we've added somebody recently, so we have.

• 34:01David Hoffman?

  So what does it mean to add someone? How does that work if you're not a company?

• 34:05Speaker 01

  So we have sort of like an internal core team without like a company. And so instead of like, you know, pre-mining a bunch of Alchemix tokens and then giving them to like, you know, the founders or core team members. What we did is we made like a special pool in our farming contract and then made a token for it that only the core members have. And then, you know, we all get the same amount of this token. So it's very egalitarian and flat. And then we put it in this staking contract and we get ALCX kind of linearly vested towards us that way.

• 34:40David Hoffman?

  Very cool.

• 34:41Speaker 01

  Yes. So when, like when we onboard somebody, usually what happens is we give them a couple month trial to see if they're a good fit with us, you know, to get a, you know, see if they're a good worker and they, you know, gel with the team. And then we do a unanimous vote to bring somebody in. So if everyone's in agreement, so and so, let's make them core, then they become core.

• 35:03David Hoffman?

  Neat, neat. Okay, so that's very much decentralized from day one ethos, is that right?

• 35:09Speaker 01

  Uh, yes. I mean, the team is like a core team, so it has some like centralization aspect to it. And we do have some managerial roles, um, you know, because we have a multi-sig and time lock.

• 35:20David Hoffman?

  Right.

• 35:20Speaker 01

  Um, for our governance at the moment. Um, so, you know, you know, like, it's like that. So we are, we're on our way towards decentralization.

• 35:29David Hoffman?

  Right. Well, as opposed to like employment contracts and, and stuff like that, it seems to be your, your dog fooding DeFi in order to create your organization.

• 35:39Speaker 01

  Yes, we pay, you know, like, yeah, and you die to our, you know, people who come in, you know, and then once they become part of core and they get the, the time token to stake into the, to the, uh, you know, staking pools contract that we have, then they become, you know, ALCX lifers at that point. So ALCX maxis.

• 36:01David Hoffman?

  And so you, you talked about coordinate and also you have in your roadmap to really double down on governance, but any last comments about how you have incentivized the community to self-actualize and, you know, write the proposals themselves. It's fantastic to see that you only wrote two out of the six proposals. Do you have any like tips or tricks to help incentivize the community to actually go from just like a Discord stray thought idea to an actual proposal? Any, anything we can learn there?

• 36:30Speaker 01

  Yeah, whenever anybody writes a proposal, so, uh, like, so four of the last six, we've had a lot more than six total. But, um, um, like, we have a really awesome, like, we have the tip CC bot, and we have that hooked up with AlUSD, Al ETH, and ALCX. And whenever anybody writes a proposal, we always make sure to give them a generous tip, whether it passes or not. Um, I know that Synthetix did that in their Discord when anybody would write a Synthetix improvement proposal. And I noticed that and, and I saw that how that got people, you know, actively writing proposals. And I thought, yeah, why don't we do the same?

• 37:07David Hoffman?

  Very cool. Hey guys, I hope you're enjoying the conversation with Scoopy thus far. And the second half of the show is when we get into this new DeFi primitive with regards to liquidity mining and governance token yield farming. Scoopy thinks that if this is adopted across all protocols that have yield farming mechanisms, that we might actually be able to see a resurgence of the ETH/DeFi ratio, the Ether to DPI token. Because he thinks that a lot of tokens have not seen the price appreciation that they could have because of this now broken yield farming mechanism that is just not up to date with the current state of DeFi.

• 37:49David Hoffman?

  So Scoopy walks us through this new primitive that he thinks can change the tide of DeFi. And so we're going to go ahead and get right into that. But first, a moment to talk about some of these fantastic sponsors that make this show possible. Arbitrum is an Ethereum scaling solution that's going to completely change how we use DeFi and NFTs. And now it's live and has over 100 projects deployed. Gas fees on Ethereum L1 suck. Too many people want to use Ethereum and it doesn't have enough capacity for all of us. And that's why teams like Arbitrum have been hard at work developing Layer 2 solutions that makes transactions on Ethereum cheap and instant. Arbitrum increases Ethereum's throughput by orders of magnitude at a fraction of the cost of what we are used to paying. When interacting with Arbitrum, you can get the performance of a centralized exchange

• 38:31David Hoffman?

  while tapping into Ethereum's level of security and decentralization. This is why people are calling this Ethereum's broadband moment, where we get to add performance onto decentralization and security. If you're a developer and you want to save on gas costs and overall make a better user experience, go to developers off chain labs.com to get started building on Arbitrum. And if you're a user, keep an eye out for your favorite DeFi apps being built on Arbitrum. Many DeFi applications on the Ethereum L1 are migrating over to Layer 2s like Arbitrum, and some are even skipping over the Layer 1s entirely and deploying directly on Layer 2. There's so many apps coming online to Arbitrum, so go to bridge.arbitrum.io now and start bridging over your ETH or any of the tokens listed and start having the DeFi or NFT experience that you've always wanted. Living a bankless life requires taking control over your

• 39:17David Hoffman?

  Own private keys, not your keys, not your crypto. That's why so many in the bankless nation already have their Ledger hardware wallet, which makes proper private key management a breeze. But the Ledger ecosystem is much more than just a secure hardware wallet. Ledger is the combination of the Ledger hardware wallet and the Ledger Live app. And if you're used to seeing all of your crypto services and favorite DeFi apps all in one spot, Ledger Live is where you want to be. Not only does Ledger let you buy your crypto assets straight from the app, but it also hooks into all of the DeFi apps and services that you're used to. Using Ledger Live, you can stake your ETH and Lido, swap on DEXs like Paraswap, or display your NFTs with Rainbow. You can also use Wallet Connect inside of Ledger Live

• 40:00David Hoffman?

  to connect to all the other DeFi apps that keep coming online. DeFi never stops growing, and the Ledger Live app grows alongside with it. So click the link in the show notes to see all of the DeFi apps that Ledger Live has, and stay tuned as more apps come online. And if you don't have a Ledger hardware wallet, what are you even waiting for? Go to ledger.com, grab a Ledger, download Ledger Live, and get all of your DeFi apps all in one space. So Scoopy, you recently put out a tweet thread about DeFi 2.0, which talked about a new generation of DeFi apps that are coming online into the ecosystem. Could you summarize your thoughts that you put into your thread for the listeners?

• 40:42Speaker 01

  Yeah, so I think if you take a top-down approach to it, it's sort of the difference between yield farming and protocol-controlled value. Right? So when you're doing yield farming, essentially, you put in a token into a staking contract, and then you get the governance token back out from it as a reward for doing. It's a renting of liquidity. And then what happens in that since a lot of times there might be a stable asset pair, like for Alchemix, we have the AlUSD 3-curve pool and then the Al ETH pool in the Al ETH saddle and curve pools, right? So those are all very, very low risk for people to supply liquidity.

• 41:24Speaker 01

  And so they kind of just treat it as a place where they can get ALCX and then dump it. And that's the kind of same across everywhere in DeFi. Anyone that offers a pool 2 or pool 1s or more of these kind of stable asset pools. You know, people just sort of see the governance token as their yield and they'll cash it out to ETH or stablecoins. And you know, this, this then kind of like migrates over to the pool two. Normally, pool two are people who are very aligned with the project. You know, they feel good enough in order to take that risk and the impermanent loss. And hoping that the rewards that they get will more than make up for the impermanent loss.

• 42:04Speaker 01

  But like when other people are dumping and that toxic liquidity comes in, you know, and that toxic liquidity is in there. Because they think they can dump on the believers and profit off of them. And in that dynamic, even the believers will be like, man, because you know, such and such, this giant VC whale or whoever is dumping on me. The only good strategy for me left over now is to do the same. Also dump, right? Yes. And so it turns what should be a community, you know, coordination tool into a PvP game. And people are trying to outsmart it now, you know, be more cunning than one each other and, you know, play off of each other.

• 42:45Speaker 01

  So it, you know, kind of gets rid of that cooperation, you know, that you really, really actually need in a DAO and a decentralized protocol. And, you know, I, I think, deep down, I knew this, you know, like, probably back in May or even like June. And I was scrambling, thinking, what can we do to fix it? What can we do to fix it? How can we turn this tide around? You know, I'd done like, you know, a lot of analysis of other, you know, protocols ahead. Yield farming, especially as like, kind of like DeFi and the DeFi pulse index was like really kind of lagging against ETH.

• 43:24Speaker 01

  It dawned on me that even with all these great revenues, these DeFi protocols are pulling in and they're skyrocketing TVLs. Like their token prices weren't matching with them, you know, and they were bleeding against ETH so terribly. And I was like, yeah, why is this? And that's where I had the realization about like these liquidity flows and, you know, this like kind of PvP, like kind of dynamic that's going there. And there was one protocol that, that stood out. Compared to all the other ones, one that I initially brushed off, and that's Olympus Dow.

• 44:01Speaker 01

  And instead of just having people yield farm, you know, and, you know, get the token that way. What they did is they, they offered, you know, their community discounted prices to get their, the, the OM token by essentially purchasing their LP tokens. So what was once a rent to own is now a kind of bond to own, or pay to rent is now a bond to own model for, for protocols. And what happens is like, the protocol starts getting more and more of its own liquidity. And the protocol is not going to dump on itself, right?

• 44:47David Hoffman?

  Ah, okay.

• 44:49Speaker 01

  Right? And as, you know, the, the protocol gets more and more and more of its share of like the liquidity on the markets, then it gives everybody involved, all the investors involved, a lot of confidence that the bottom is not going to fall out, right? And then traders know that, hey, you know, there's all this liquidity. I know I can trade and, you know, the markets are still going to be there. So traders like to trade and volume goes up. And then people's like, you know, investors come in and they're like, wow, you know, you know, the, the market makers are not dumping and manipulating the price. I'm going to get in. I think this is a good investment, you know? And sort of all this stuff like kind of dawned on me that it, it kind of flipped the dynamic on its head.

• 45:33Speaker 01

  You know, because liquidity is super important, but how you get it really matters.

• 45:39Speaker 01

  And seeing how the Olympus Dow community was really cooperative with each other and, you know, everyone was really, you know, vibing over there, for lack of a better word, you know, made me like, yeah, really think about it. And so over the summer I reached out to Olympus Dow and I asked them about, you know, possibly offering their, their tech for, you know, alchemics. Because I wanted to do something about this. And I was kind of hesitant to add things like token vesting and, you know, other lockup mechanisms.

• 46:14Speaker 01

  And you know, and or even like really dramatically altering the the emission schedule because especially the last one dramatically altering the emission schedules. I've seen other projects do this and it kind of backfired. You know, people were expecting there would be a pump once the inflation went down, but then nothing happened. And then the protocol didn't have as much incentivization for liquidity. And then, you know, the TVL dropped and then it kind of went down this like, you know, spiral.

• 46:44Speaker 01

  And I also, as somebody who, you know, has been yield farming since 2018. Now, yeah, I guess it was 2018. No, no, it wasn't 2018. It was early 2019 when Synthetix sort of had their kind of ad hoc

• 46:59Speaker 01

  S ETH ETH pool on Uniswap that they incentivized. I was in there in the early days.

• 47:07Speaker 01

  And then obviously compound Wi-Fi and the rest. And I really like yield farming, but I don't like yield farming contracts where it's like they make you lock up like, or you try to go claim and you can't get all the tokens and you have to vest them. I never liked that. And I was like, meh, not my cup of tea. So when I I heard something about Olympus DAO, you know, in, you know, and using their bonding services and they were like, yes, we actually started thinking about this ourselves and offering this to other protocols because we had the same realizations as you. And that was kind of the seeds of Olympus Pro, which is their newly launched app that we, you know, we were one of the launch partners with them.

• 47:46Speaker 01

  And so essentially, you know, if somebody, what they can do is they can kind of trade LP tokens for, you know, a governance token at a discount. Okay. And the way that it works is really genius. Basically, there's no oracles involved. It's all just market dynamics. So it's just you initialize the, you know, the bond program, set initial price, how much, you know, tokens that you want to sell weekly and things like that. And the Olympus DAO team actually helps you set this all up and they're there to support you. So if you are not thinking about going there, there is a lot of support. And then, you know, the more time there is between bond sales, the greater the discount will be.

• 48:31Speaker 01

  And then when somebody finally does buy the bond, the price goes up. So the discount then goes away, right? So there's always kinds of finds, it always, always tries to find what the value, like how much the, the market wants to discount the, you know, the token at the time. And so there's always, you know, constant buy pressure for the bond. So the, the protocol is always going to be, you know, increasing its liquidity this way. It's not as fast. It's not like a shortcut to getting liquidity, like a, you know, pool two would be, or liquidity mining is, it's more of a gradual process.

• 49:06David Hoffman?

  So more sustainable at the same time, right? Cause there's always trade offs.

• 49:09Speaker 01

  Yeah. Yes, it's a lot more sustainable. Yeah, you're not going to inflate your, your token away by doing this.

• 49:16David Hoffman?

  Okay. So let's, let's go through the dynamics of this just one more time, just because I haven't totally wrapped my head around this. The currency that you're using to buy the token, is that defined or is that up to any protocol that wants to use this method?

• 49:32Speaker 01

  It's completely up to any, the protocol for what they want to do. If like right now.

• 49:38David Hoffman?

  It's a common token.

• 49:39Speaker 01

  It's LP shares.

• 49:41David Hoffman?

  LP shares.

• 49:42Speaker 01

  So Sushi swap, Uniswap, et cetera. Those LP shares are used to, um, you know, you bought, you basically trade those LP shares for the, the native governance token.

• 49:55David Hoffman?

  And so it's the LP share of the governance token. So like if it's Alchemix, it's Alchemix ETH is the LP share and you're selling AL, yeah, AL, Alchemix ETH, LP share for more Alchemix, correct?

• 50:09Speaker 01

  Yes, that's correct. But it doesn't have to be limited to that. Alchemix, we have other pools that are really important to us, like the Alios D3 curve pool and then Al, Al ETH pools. Pretty soon we're going to be offering the bonding service for them as well. So people can trade in those tokens for ALCX as well. And that's going to be really important for the long-term sustainability of Alchemix, because we definitely need liquid markets for our protocol to work the best it can work.

• 50:38David Hoffman?

  Okay. So you take the. Preferred LP token for whatever protocol, it sounds like for Alchemix, there's multiple LP tokens. So multiple, multiple work. And then you put it, you bond it in the sense that like you put it into a contract for a period of time. And then by doing that, you get to the ability to purchase the governance token in Alchemix's, in the Alchemix world, it's the ALCX token. And then you are putting the contracts and you get to purchase this token at a discount. And then time passes and then over time, somebody else comes and buys the bond. Is that right?

• 51:21Speaker 01

  It's a little bit different than that. Sorry, I might not have explained it very well or got you tripped up there. So basically, when you go to the Olympus DAO side or Olympus Pro and you go to purchase a bond, you'll see that there's like a certain like discount that you can get on it. So, but the currency that you buy the bond with is the LP share, right?

• 51:41David Hoffman?

  Right. Yep.

• 51:42Speaker 01

  So when that happens, you like the, the protocol immediately gets that LP share.

• 51:49David Hoffman?

  Right.

• 51:50Speaker 01

  And then you have, there's like a seven day vesting contract for the governance token that you just bought.

• 51:58David Hoffman?

  Okay.

• 51:58Speaker 01

  That's also.

• 51:59David Hoffman?

  You sell it, so you sell like $90 of an LP share for $100 worth of tokens, but you're not going to get those $100 for seven days or so.

• 52:09Speaker 01

  Yeah, they linearly vest over the period of the vesting. And the vesting period can be configured however you want to. If you want it to be a week, that's fine. If you want to be a month, that's fine. It's just one parameter that you, you set in the, when you're initializing the bonds. And you can also alter it, you know, even while it's live. So.

• 52:27David Hoffman?

  Okay.

• 52:28Speaker 01

  Yes.

• 52:30David Hoffman?

  Okay, then what happens next?

• 52:33Speaker 01

  So after you buy the bond, you, you wait, you know, for it to vest. If you want to do a partial claim halfway through, you can do that as well or anytime. And then you have that, that token and you, you know, some people who are long-term aligned with the protocol will just hold it and add it to their portfolio. Other people, they might want to do is try to play the spread, you know, like, hey, I just got a 9% discount on this ALCX tokens. And if I sell now, that's, you know, that's a, you know, 9% profit I got after this week. You know, assuming that the, the token doesn't budge in price during that time.

• 53:10David Hoffman?

  And in theory, they could just go do this again, right? If they got a 9% spread, 9% arbitrage, they have in theory 9% more capital than they did if prices didn't stay, if prices stayed the same. So they could just keep on doing this over and over and over and keep parking this bread over and over and over again?

• 53:26Speaker 01

  They could potentially, but there's also risk involved. Like if, if the price of ALCX goes down in the meantime, then they wouldn't have profited.

• 53:35David Hoffman?

  Right, right. So, so that seven day vesting schedule is what keeps people that are less aligned away? Because people that are more aligned are more willing to take that price risk because they believe in the protocol regardless. Is that correct?

• 53:51Speaker 01

  Yes. And it's also one of those things that like there, the ALCX ETH SLP token, it's very deep and very liquid. And, you know, especially with like, you know, our V2 coming up, we, we got on Olympus Pro, we were selected as one of the reactors in Tokamak. So like, kind of like, you know, things are on the up and up. I think for Alchemix, and if somebody's going to be in that SLP pool for ETH Alchemix, they might experience a lot of impermanent loss on the way up. For, you know, Alchemix, assuming it does go up, you know, this is not financial advice.

• 54:28Speaker 01

  So like, that's also another layer of strategy for people to consider while they are, you know, you know, you know, thinking about doing bonding through Olympus Pro.

• 54:38David Hoffman?

  Okay. So explain again to me the differences between like, you know, yield farming, you put your ether or your, your, your pool two tokens, your, your LP tokens into a contract and then you receive governance tokens distribution. In this model, you put your LP tokens, you sell your LP tokens to the protocol to receive the governance tokens. But if you are just receiving the governance tokens, which I'm pretty sure are newly minted, and you are selling them to do that again and again and again, how is that different than just yield, just dumping the yield farms from the original method? Where does it, where does that difference come in?

• 55:14Speaker 01

  So if people are only playing the strategy where they are, you know, like recycling the, you know, the ALCX they get from the bonds back into SLP to buy more bonds, um, you know, that's essentially exactly what's going on with yield farming, especially like the, the yield aggregators who, who take, you know, the LP tokens and stuff like that. It's essentially the exact same thing. Except that the protocol is now getting more and more and more of that liquidity share. And it's rooting out the toxic liquidity that's a part of that pool.

• 55:46David Hoffman?

  It's a selling mechanism that forces that one-way function of liquidity into the protocol?

• 55:51Speaker 01

  Yes, it's a one-way thing like the, you know, you know, the people in all, in Olympus Pro and Olympus Dow, like they're not going to be selling their own LP shares. They're not going to be like cashing them out and dumping on you and stuff like that.

• 56:04David Hoffman?

  So Right, because it's much more capital intensive, right? Because you are selling your LP shares, you don't get to recycle that capital because you already sold it.

• 56:13Speaker 01

  Well, the thing is, let's say like you're, you can do that. So if you trade $10,000 worth of an LP share and you have a 10% discount, right? Then you get $11,000 with the ALCX, which then gives you more ammo to then go in and then sell half of it, you know, and then get more LP shares and then repeat the process. You could do that. And I'm sure that, you know, there are people who, who use that strategy. But even if they do that, the protocol is earning that. It's not like the protocol is accumulating more and more of that LP. And eventually, you know, it'll start to outnumber or like be the majority holder of liquidity in the, uh, you know, for the protocol itself.

• 56:56Speaker 01

  And then when that happens, like it kind of, you know, flushes out all of the, the toxic liquidity, right? So I like to think of like LP farming or like liquidity farming or yield farming rather as um, kind of like a drug, right? Like it, it's like really awesome at first, right? Make your protocol grow and it puts you on the map.

• 57:20David Hoffman?

  Yeah.

• 57:20Speaker 01

  Yeah, steroids like, or it's like, you know, even heroin for that matter. And you're euphoria when you first launch, you know, the float is low and, you know, people, the only way people can get that APY is to buy your token. But eventually that, you know, that drug that, you know, becomes a problem and you become addicted to it and you rely on it. But it also, just like a drug, turns into a very toxic thing in your life or for the protocol in this case. And I like to think of like Olympus Pro. I know I've been like shilling them so hard today, but I like to think of them as like tokenomic rehab.

• 57:53David Hoffman?

  Hmm.

• 57:54Speaker 01

  Yeah, you flush out that toxicity and you get on your road to recovery and be, you know, make sure that the, you know, the liquidity in the pool is aligned with the interests of the protocol.

• 58:08David Hoffman?

  Right. It's like pesticides for the liquidity locus out there.

• 58:11Speaker 01

  Yes, exactly. That's a good analogy.

• 58:15David Hoffman?

  Yeah, no, I like, I like ending these, these more technical conversations on analogies because they keep the, they allow the listeners to latch on to something. Scoopy, where, where does this go? If everyone start, do you think everyone should adopt this new like primitive? And does this, what does this really unlock?

• 58:33Speaker 01

  I think that if you are a DeFi protocol with, you know, robust yield farming program, especially one that's finite, I think that you should definitely do this because yeah, you might bootstrap your liquidity, but what happens when the rewards run out? Aren't most of that mercenary capital, especially if it's this toxic liquidity flow, they're just going to drop you, dump your token and then move on to the next one to, to, you know, harvest. So I definitely recommend other builders in the space, other protocols to consider, you know, Olympus Dow. And I think, you know, if more and more people in protocols do this, then it's kind of turn the tide for DeFi, which has kind of been

• 59:15Speaker 01

  suffering over the past, you know, number of months against ETH and the broader market. And I think it's going to be a part of the resurgence of DeFi, a big part of it.

• 59:26David Hoffman?

  Do you think that if, that this new mechanism, new primitive gets adopted, that like it ultimately might show up in the ETH DPI pair?

• 59:39Speaker 01

  You mean Alchemix or, or Om or what? Like?

• 59:42David Hoffman?

  No, I mean, like if you talk about it's a resurgence to DeFi, it's like, do you actually think like DPI as in just like a, um, oh, yeah, indicator of DeFi at large? Do you think that this might actually turn the tide on the, uh, the DPI versus ETH ratio?

• 59:56Speaker 01

  I mean, if the protocols that are listed on DPI adopt this, then I think, yeah, I think it would help turn the tide.

• 1:00:05David Hoffman?

  Interesting.

• 1:00:06Speaker 01

  I also think that, you know, kind of a transition away from, you know, quote unquote worthless governance tokens to, you know, like tokens that do revenue share and, you know, you know, dividends or, you know, however they, whatever mechanism they, they decide is also going to, you know, help turn the tide as well. Because when people see that, they see it's an investable asset and then DPI, they could actually, you know, participate in like the staking of, you know, the, these tokens in their networks and then, you know, use that to even compound the gains as well. So I, I definitely think that, you know, it, it's going to help rehab DeFi.

• 1:00:44David Hoffman?

  Nice.

• 1:00:45Speaker 01

  We, we saw our TVL, we go up 100X over the past year for DeFi and the tokens have not 100Xed along with it.

• 1:00:55David Hoffman?

  Right? Interesting. That's a really good point. That's definitely a really good point.

• 1:00:59Speaker 01

  Even though it should have, like by all metrics, it should have.

• 1:01:01David Hoffman?

  Right. Yeah. No, total, total value locked in DeFi is about to hit all time highs and tokens are not anywhere near all their all time highs.

• 1:01:10Speaker 01

  Even the juggernauts are, you know, you know, not doing well. They've been flat and especially in down against ETH.

• 1:01:16David Hoffman?

  Yep.

• 1:01:17Speaker 01

  You know, and those are ones even with like really, really, really impressive revenues as well.

• 1:01:23David Hoffman?

  Well, Scoopy, you have definitely given me something to talk about. So maybe I need to go over to the Olympus DAO and pull them into a podcast, get them to talk about this.

• 1:01:31Speaker 01

  Yeah, for sure. I can introduce you to people on their team. Yeah, no problem.

• 1:01:37Speaker 01

  Oh, there's one other cool protocol that's like, you know, in, you know, imminently launching, uh, TokenMac.

• 1:01:42David Hoffman?

  Yeah, yeah. Yeah, we did a meet the nation with them.

• 1:01:45Speaker 01

  Yeah, yeah, they're really cool. And I think they're also going to be part of this like DeFi 2.0 wave, finding more healthy sources of liquidity for, uh, for, you know, participants in DeFi.

• 1:01:58Speaker 01

  And for protocols. Yeah. So we're really excited to be on top of them. They have a yeah, awesome team. I'm sure you know, because you talk to them and stuff like that. So I'm excited to be working with them. And yeah, we just did a Dow to Dow token swap with them.

• 1:02:12David Hoffman?

  Oh, really? Oh, that's fantastic.

• 1:02:15Speaker 01

  Yeah, they are a large, I think they're now, I think our fifth or sixth largest stakeholder, you know, outside of like some of our investors and some of the bigger whales. And, you know, we now have a lot of Toka ourselves. So we will be directing liquidity over at Alchemix in the Token Mac protocol.

• 1:02:32David Hoffman?

  That is kind of like the bullish case for Token Mac is that everybody wants their token because all the DeFi apps want the power to direct the liquidity towards the ways that align with them. So Token Mac seems like a perfect protocol to do a token swap with.

• 1:02:46Speaker 01

  Yeah, we're excited. I think there's a lot of alignment. And I think like, yeah, there's gonna be a lot of DAOs kind of scrambling to get their hands on Toka, you know, especially as they get reactors in the system and stuff like that. So yeah, we even saw it in the core event, like there, like as people were vying to get selected as their reactor, like, you know, protocols and supporters of protocols were scrambling to buy Toka so they could, you know, influence the vote and stuff like that. And it was just like the coolest governance experiment experiment I've ever seen in my life. And like, I was just glued to the page. I know I had a horse in the race, you know, so to speak, you know, but even then, like, it was just fascinating to see, you know, like, the leaderboard always constantly shifting,

• 1:03:30Speaker 01

  you know, and then seeing people lobbying on Twitter, you know, I kind of activated a cheat code and I said, Yeah, we'll give you an NFT if you vote for us.

• 1:03:41Speaker 01

  And I was looking at the data and I see like a bunch of ones that are like, you know, like point 0001 Tok vote for us. I'm like, Oh, you guys just want the NFT, obviously.

• 1:03:53David Hoffman?

  Well, that's a pretty funny, it's a pretty funny dynamics going on in this new era of what is kind of like DeFi 2.0, right? A new era of DeFi protocols coming and building on Ethereum that look a lot different from the legacy protocols. Wow, do I use that word like Maker Dow Compound? Like definitely a new cohort of protocols coming into the ecosystem right now.

• 1:04:16Speaker 01

  We'll call them the Generation One protocols. I think that's a little bit nicer of a term.

• 1:04:22David Hoffman?

  Yeah, because we use legacy to knock the legacy financial system.

• 1:04:26Speaker 01

  Yes, yes. Gen one, you know, I mean, huge shout out to all of those protocols. Like, we're standing on shoulders of giants over here. You know, like, it was originally me listening to Epicenter podcast in 2018 with like all the interviews with Rune and him talking about, you know, Maker Dow and me listening to the like podcast like 10 times in a row just to get my mind around the idea. And now these ideas are mundane.

• 1:04:53David Hoffman?

  Right.

• 1:04:53Speaker 01

  I think how far we've come. It's amazing. And I think like when Gen 3 DeFi comes out, we're all going to have our minds blown by, you know, what all those, you know, 16 year olds at Rar Capital are going to be doing, you know, and stuff.

• 1:05:08David Hoffman?

  I'm very, very ready to just sit back and become a crypto boomer while like innovation just goes and outpaces my ability to keep up with it.

• 1:05:16Speaker 01

  We'll be semi-retired farmers in a few years together, man.

• 1:05:20David Hoffman?

  Awesome, Scoopy. Well, thank you for coming on and sharing some thoughts which are also synonymous with alpha these days on the Bankless Podcast. If people want to learn more about what you're up to over at Alchemix and anything else that you have to share, where should they go?

• 1:05:36Speaker 01

  Yeah, so you can head over to our Twitter, @AlchemicsFi. You can go to our website, alchemics.fi. And yeah, please join our Discord. We have a welcoming community. Ask us anything. There's always tons of people there to help you and help you get started now, Alchemix, and learn more about it.

• 1:05:54David Hoffman?

  And we will have all of those links in the show notes, whether you're listening on YouTube or on the podcast. So, Scoopy, thank you for coming and joining with me on the Bankless Podcast.

• 1:06:04Speaker 01

  Yeah, thanks for having me, David. It was a blast.

• 1:06:06David Hoffman?

  Cheers.

• 1:06:08David Hoffman?

  I 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, podcasts, 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 the description to become a Bankless Premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders,

• 1:06:48David Hoffman?

  Ask Me Anythings, and weekly rollups where we summarize the week in crypto and other fantastic content. Thanks everyone for watching and being on the journey as we build out the Bankless Nation.