Aggregating DeFi: yield, ponzinomics, and building lasting value | Panel | ETHDam 2024

[Music] hello everybody my name's David and we'll get all the panelists up here first so I think we have everyone and maybe we'll do some introductions and I'll give you the microphone uh just for everyone you can introduce yourselves I you got a microphone all right so let's maybe start over here you can start by introducing yourself and give one sentence she of what you're doing uh hello can you hear me yeah okay cool I'm weso I'm the lead developer of beefy we're a multi-chain yield aggregator on 26 different blockchains uh I'm Anon from one inch I like how how short it was I'm Frank from Summer and uh we aggregate lending markets cool and uh I'm David uh xrv Genesis team now working on X20 3. a uh so anyway we want to keep this uh panel interesting for you guys so I'll try to start with some interesting questions I'm reading my notes on the phone by the way so the first one is around Forks so as we know in this space there's a lot of forks uh I think or Forks or copycats and things like that so I think 1 in sort of uh originated sort of related to Unis swap uh beefy is related to YN in a way let's say IDE way at least can you comment on Innovation versus copying in the space let's start start with one in okay cool that's interesting question actually uh I don't see this in any other space I see this in Define and blockchain and crypto that that's probably the only way for protocol to exist protocol source code should be open source it it doesn't mean it should be open for copying but it's usually like that for example we at 1 inch we usually develop protocols with MIT license some uh teams select uh BLS license or a patch license they are pretty every of these license allows anyone to use this code as they wish but some teams they try to protect their code at least is temporary from being uh copy copy cut copy uh for example Unis is doing this they prot protecting their code with business license for a few years and after a few years it became open license again so actually I like that this is happening that all these Innovations all these Protocols are open source because it's also great source of inspiration I had just presentation about algorithms from those protocols how I would uh create this presentation and analyze this this thing if those Source codes would be just closed and proprietary like I can't analyze most of the fin Tech Solutions especially because of this they propriatary and this means that the their code base is pretty huge and yeah all this Dy makes us to develop smart contracts which are short easy to read and safe and probably also gas efficient so yeah that's the best thing but for sure if we have this that source code is available someone always find uh find it useful to use it and sometimes it's uh kind of borrowing code with uh adding new things sometimes it's just relaunching same code with the just numbers change it wallets change it or something like that I mean it's in vable but it's it's possible to copy code of your project but it's not possible to copy your auditory your users and uh yeah the protection here comes from uh actual traction y got it beefy so the idea of working something has been around forever so like you think about the iPod wasn't actually the first iteration of a musical player portable musical player right um but what Apple did was they took the idea and they made it better and more useful and easier to use and so they improved upon the original idea and I think that we're sort of seeing that happen with forks and obviously sometimes you have like one for one people just trying to you know take advantage of the situation and it's very easy they can copy the code launch something uh very simple and then not really putting much effort into it but for like beefy you know we found it you know hey originally the idea of yield aggregation um to you know quite enticing especially when the D boom happened in 2020 and people were making like a th% Yi and stuff like that which was sort of seeing a little bit now uh come to fruition again um but it didn't really exist the urine existed on eth but the that idea didn't really exist on a lot of the side chains and that was kind of the boom of all of these new blockchains BC was coming Avalanche polygon uh and so we were able to kind of fulfill that need on these other blockchains uh and then improve the actual you know user experience and so we started to continually iterate and and make it our own even if it originally came as a forked product um so I think that it's you know it's also really important in the space we just talking about open source code like we believe in that and it gives you a start as a developer um not only from like hey you know you don't have to come up with the whole idea yourself you can just iterate and improve on the idea uh also if something's been audited it can help a little bit on the security side because you're not having to like completely have a uh new novel codebase you can kind of rely on the previous um uh using of the codebase of the the previous audits the security so uh I think it's important for the space uh B has been forked 400 times uh over the last four years um and we still are um I'd say like the brand leader in the multi-chain aggregation space so it really does fall down to your brand your users how well you can can compete in the market um at the end of the day even if you're code is open source and it gets forked yep and and I guess the one of the messages here is that even if you Fork code you should still get it audited uh whether you make changes and shout outs to I think one of the sponsors Sherlock uh they're they're around here as well uh they're good Auditors um but also we we we talked about standing on the shoulders of giants here so I guess we pay homage to the original code authors we do stand with un swap woo um and I guess the to put you guys just on 1 in and beefy for now what what are some open- Source innovations that you've also brought forward in the industry if you can name just one I can name few uh for example we at 1 inch we usually contribute to popular solidity libraries I'm mostly talking about protocol level because I'm mostly involved in this development but I'm pretty sure guys who work on back end front end they also uh have price similar thing but it's different I mean uh this industry is different from any other industry by its protocol level smart contracts and uh yeah we contribute a lot to open Zeppelin libraries we propose changes we propose features we create new ear se's how developers are uh catch up on ideas to kind of standardize them and make it work uh similar across industry because else they will bu be built differently and it will be much harder for yield aggregators to work or any other aggregators to work so following these uh standards is good idea and uh yeah we also contribute even like to solidity compiler so at least trying to do this can can I ask a followup question to this uh are are you considering open sourcing the uh the Pathfinder algorithm that you guys uh are are using probably at some point uh we are checking this time to time but you know it depends we tried to predict who exactly will benefit from this and for now we saw that 1 in users would not actually benefit from this so competitors would benefit much more but yeah I mean offchain part of any project was always not that open Source by default especially because uh it it does not involve any involve any security risks and other things it's like initially the very first versions of 1 in probably for the first year it was fully working on front end so that's insane but yeah we did all the algorithm all the Pathfinder on front end but what happened then we had so many Integrations right now we have more than 100 protocols on Main net and this means more than 50,000 smart contracts so you just can't handle this amount in front end people are opening this front end from their mobile phones that's impossible yeah that's a good point okay beefy uh let's say open source innovations that you've contributed I mean everything we do is open source um so when it comes to like our vault and you know standards uh our strategies that we do um but I'd say that uh the most useful thing is probably our infrastructure uh so we even have like a a zap contract where you can kind of create liquidity and deposit into B Fe all in one using one inch actually um but people have used that and come to us and ask how we're using it and how to integrate in the front end um also like when we relaunched our token uh we utilize the XR C20 standard uh so instead of having uh you know five different versions of you know usdc on a chain uh they're trying to get where it's you know just one version of the token um and so working with Connex on like developing out that so that um a lot of these protocols who are deciding to launch on the different changes can use different Bridge infrastructures without having to have different tokens um so yeah that's just a few things we're sort of working on Okay cool so that's that's good to hear because I think yeah if you're if you're forking or building off uh other open source projects you should contribute back to the open source world uh so that's good good for you guys um moving moving over to summy for a bit here you guys uh originated out of makad correct uh used to be called Oasis uh so you used to help users create cdps essentially for makad but now you're an aggregator of let's say out explain as yeld bearing assets or something like that yeah lending markets yeah lending markets how do you ensure there's no potential conflicts of interest since your Origins are from Makow yeah can you comment on that uh yeah so well uh first of all we we don't get any funding from maker Dow or uh have have never gotten funding outside of just um uh like that that the team originated from it so uh like uh we originally got our salaries from the maker Foundation uh that's that's um uh what like well we we started with OAS doep as you said but um uh like these days we are like a team of 30 plus people and uh out of those 30 there's about 10 people who were formerly with the maker Foundation but the rest are just all all new people and like we we love all of the new uh protocols that that are coming up in the landing space so uh like for example uh like morol blue spark and um Ashna are are like uh the New Kids on the Block so to say um uh we support all of those while also still like as you said standing on the shoulders of giants like maker and Ava uh which which we have supported for a long time and yeah we we try not to be too opinionated about it but basically show uh the best options for the users based on their criteria okay got it here's a tricky question for you if you guys are deep in the def5 space you know there's a war happening between maker da and arve so how does summery decide to either deposit in arve or thei in spark which is a fork of a uh yeah so that's a that's a good question so um there there's I I I wouldn't say there's a war there's like uh I I I consider it just love basically uh maybe from the from from the a side it might be seen as a war uh I I I'm not I'm not sure yeah um no so like uh we we let the users decide uh and and let the markets decide so um if the markets determine that the rates are better on Ava uh then they will show up as as like if you sort by uh borrow rate and therefore uh like attract more liquidity um uh so right right now it's still very much the the user's Choice ultimately of uh which markets are are they interested in uh yeah very very soon we'll also make it uh super seamless to go from one to the other uh so like in our opinion that only enhances the competition between these um uh between these underlying protocols that the users make use of okay got it um and I think maybe go going to the next topic around I think a lot of us came into defi or crypto to to get rid of the middlemen uh and because we're sort of upset or didn't like the current system but this panel all aggregators right so you guys are becoming the middlemen or the gate now all right um so how do you uh balance that between like gate becoming a gatekeeper uh or centralizing power uh yeah if you can talk on that maybe we start with Bey and go this way um I think it's because it's it's hard like using di for a normal person is not easy and so what we do is we make it much easier um also like if anybody's not using an a def aggregator I have no idea why you're swapping through one protocol cuz you're just getting a worse rate where you're leading yourself into uh issues where you're going to have uh bad price impacts or you're going to have slippage issues so um you should be using like a dii aggregator on all blockchains um and that's the same thing I think with yield like yield just makes it overall easier to handle like right now it's in order to be a normal liquidity provider and let's let's say earn a farm reward you have to do like seven transactions in order to even you know just get started and then if you wanted to continually compound every day you have to go in into do that and and so we just make it more you know easy easier to use for the retail users easier to use even for institutional users um and so I think that's really where we kind of play the space we're doing things that are a little bit more complex uh and taking away a lot of the steps that somebody would have to do in order to do the same thing they don't have to use us they can do it their themselves but um I think we play a role to make it easier to I think a better value prop all that got it yeah uh I agree uh actually it makes no sense to use uh most of the protocols which have like number of options like I mean there are hundreds of dexes tens of money markets now and uh yeah there is a huge room here for aggregators and they appeared and took the niche and got a lot of users attention and traction but probably they will be also included by default into wallets it's easier for wallet to provide this functionality as swap functionality and use those aggregators under the hood and use the landing or something like this for Lings it a bit different because diff risks are different for uh Dex aggregators it's not like that because uh any Dex could be integrated any even dexes with bugs which are vulnerable it it makes like zero sense in terms of security for users aggregator is kind of protect them from all those smart contracts it's uh one more layer here but when you put your money in different protocols and use aggregator you have different risks in different protocols especially if some of them are like freshly deployed like yesterday they have different risks and uh the thing why they have different rates is that they also take those risks into account so usually I will see I see this situation is that they are or soon will be risk uh risk yield Balan it so it's kind of proportional to yield and uh negatively proportional to risks and uh yeah uh as as you asked here is the room for being a gatekeeper but yeah this is something which can be also solved by the technology as usually is what I like in technology that it solv issues which appeared because of the technology so uh yeah one inch launched more than one year ago this Fusion uh mode which actually is kind of intent like it's highly popular nowadays describe any signature based protocol as intent so it's intent you just provide signature what you want to swap and then Dutch auction starts and it's D Auction which is uh improving exchange rate for counterparties for resolvers and it's uh making exchange rate worser for you every second but there are multiple resolvers and they compete with each other and whenever rate is acceptable for them they feel or partially fill your order and it's like competition driven and uh Dutch auction based and that's how we kind of exclude ourself from this thing as being a gatekeeper because we allow uh parties who been called resolvers to help users to feel their orders and they do it in more professional way why all this thing appeared that we saw that there are a lot of things with meev attacks in blockchain and every user there's no way any every user will protect themsel so most of the users are not trying to protect even if you will warn them and try to force them this wouldn't work they will find way to avoid this and uh whenever you use this thing where professional resolvers who compete with each other they do the trades actual trades this helps users to protect them are you like centralizing the liquidity providers then because you're making it a little bit harder for normal people to be a liquidity provider since then no not not really I would say if we would collect quotes from these resolvers and decide who is better this would be centralization here but how it works now users are known like a limit orders which where price is not fixed it's like moving on Dutch auction and resolvers compete to get the best price for them so that's how one inch itself is being excluded from the trades but that's good for users because what we made all this competition for resolvers forcing them to improve prices for users to have more liquidity to have more exposure yeah I I I think also in general like uh the whole uh reason of like using defi is is the optionality uh so uh it's it's very easy to uh to get your assets off of summery and use a different app and therefore uh the competition between uh these U is extra Fierce because you have to make sure that you have the best experience and have the best security in mind and have the best uh user um like flows Etc so uh have the best rates and um you have to do all of that because uh um like if if you go to uh Bank like I'm here from the Netherlands if you go to the uh the ING Bank the biggest bank in the Netherlands and you have uh let's say um 100,000 in uh in your savings account and you're trying to move that to a different bank uh you cannot just do that in one transaction uh or or two or three uh like there's a a blockade on uh transactions upwards of 10,000 there's a u multiple layers of um what they call security but what is actually like just uh the fact that they are custodia your your money and they are saying well we don't like you to move that quickly out of our uh out of our um Banks okay that makes sense I guess I guess that's one of the advantages of defi is there centralizing power but we can always move our assets hopefully frictionlessly or choose choose other products um okay let's talk about pwn nomics we talk about yield and and risk and things like that like a question that comes up commonly is like what where where is the the yield coming from like is all ponies all the way down um maybe let's say let's start with b since you deal directly with yield yeah where does the yield come from I mean if you're yield forming a governance token then it's the speculators is where the yield is coming from um if it's like you know obviously coming from like lending protocol the supply interest is real um the trading uh yield from Trading between two assets and being a liquidity provider is real uh the thing is that you know D can't really exist without really thick liquidity so like you need a lot of Supply to be a lending protocol and you need a lot of thick liquidity um as a uh uh amm because if you don't have it then obviously the price impact is going to be terrible and nobody's going to want to trade through you so uh there was like especially for newer protocols an over incentiv incentivization of um liquidity because you and that's what they're doing with the governance token because get to get liquidity providers to take the associated risks with putting it into a new protocol um in order to even facilitate usage of the protocol itself so um yes I guess the the yield does come from the speculators at some point and so you're seeing that sort of with like Aerodrome right now um it's been uh absolutely on fire and been up only and so the yields on providing liquidity on Aerodrome have been significantly higher than a lot of other places um whereas I think like on ethereum um you know putting liquidity on Unis Swap and being a liquidity provider uh your risk adjusted yield is a lot less because uh Unis swaps trusted it's been audited it's uh battle hardened um and so you're seeing a lot of very large liquidity providers very competitively competing for those trading yields um but the trading yields there are real and their real volume that's sort of going through and whether it's Arbitrage or real trading volume but um yeah so I I think it's a mix depends on where the yields you know sources yeah got it just being wary of time maybe yeah quick comment yeah I can comment to be uh as far as I can see some of the yield is coming from uh trades like uh transaction fees like swap fees some fees and some protocols they could be different are coming somewhere and those who provide liquidity or do some other useful job for the protocol They will receive this as a yield they will have some exposure in assets or in work they do and they will earn the other source of yield is when someone is borrowing there are a lot of borrowers as I described on my previous presentation they borrow for some reason sometimes people borrow dollars for either because they don't want to sell either today they want to sell it on alltime high or something like that so whenever e will be back on alltime high they will return the their Dept repay Dept and uh they will still have their ether to sell or something like that but sometimes people make leverage with the money markets for example they put either borrow usdc then they buy more either put it and then borrow more and they at the end they have leverage they turn their 1,000 of dollars into 4,000 of dollars of other value and 3,000 of USD depbt so it's still like four 1 is 1K but you have 4X exposure on ethereum to Dollar it grows faster but it's also drops faster so and those who borrowed they are happy to pay tens of percentages annually and those who provide them liquidity they get this yield and one more source of the yield is uh incentiv like basically farming thing which uh was initiated proposed by synthetics and uh yeah that's pretty natural and we all some people still remember defi summer in 2020 where there were like uh hundreds of new assets uh tokens and what they did they did farming for liquidity providers so whenever you provide liquidity of this asset with some other asset you get more of this asset yeah as you said it's probably ponics yeah it's like this if good funics yeah actually it's like this it's like a bonding curve and yeah it's economical activity which works like this and if project do not have any other like real application yeah it's probably clear upon zo all right quick quick question before we open up the floor to questions uh you want I'm a quick point you want to make yeah just that I I I've not yet seen a Luna of this cycle so so there's there's not really yet a real bony scheme know no no jokes jokes so that means we're not at the top then that's a different that's a whole another panel but no that's that's fair um let's open up the floor to questions can we switch over to the slido apparently there's questions um questions no there we go I I can respond to the eth one if You' like maybe you want to give a I'll let you have the last word you can you can respond Ona on on on Thea so so real brief uh like uh I I think Athena is a real source of yield because it's uh basically using the funding rate uh of Futures on centralized exchanges the the question is just whether um like whether it is uh as risk free as some deem deem it to be because indeed like there are many uh things that can go wrong uh with with ethena and it's not all written in smart contracts there there are entities that you need to trust okay fair f I won't dive too deep into that uh let's see the the top question uh 1 in is an open source oo developers can't generate swap C data without your API Anton what do you say I need to respond to this yeah okay uh yeah 1 in is more than one protocol first so this is about one of the protocols the very first aggregator one and this is only true for one of the aggregator protocol method it's for method swap but the are like tens other methods to swap on specific pools on specific uh uh sequence of pools and other things the only super arbitrary swap path is uh is not possible to compose uh as a c data that's true uh yeah probably we will solve this but I'm not sure if anyone was asking for this yeah but some of your code is open source yeah I mean every protocol is open source we have limit order protocol we have fings we have solidity utility library with a lot of useful code yeah all other things are open source yeah that's true okay good point all right uh the next question what's the more secure way to generate a random private key using a wallet or repeatedly flipping a coin wait wait what so what's the best way to generate a private key should we risk it on our systems of flip a coin what that should be crypto safe random true so what what's what's some R what's some opinion on on Randomness here I think that's the the core of the question what's the best way to generate Randomness I I can give like a extra comment here yes some projects uh did not succeed it with the good random and this uh was a huge issue for users whenever they created some wallets I remember one of the pretty popular extensions in the past like one year ago they discovered back that they only generate for user one of four billions private keys and that was a huge issue I think most of them were hacked at the end because four billions of wallets could be enumerated on your like laptop in like few seconds few minutes so it's not a huge deal so yeah generating wallets is a should be done by a proper code and using a proper source of random it should be non-deterministic crypto safe random true and um yeah don't roll your own crypto I think so the next question what value have you delivered back to your user base through your token for everyone that has a token I think that's only some of no you don't have a token do we we don't have a token but but yet we still have a ton of users so uh apparently those users love our product do you have some Alpha to drop around potential air drop farming for suy there's there's nothing I can comment on on this question you heard it here first guys all right um beefy how about you what what value do you guys have a token we have a token yeah yeah what value have you guys delivered back to your user base I mean a portion of the fees is delivered back to the the token stakers fees yep yeah that's good and one inch have a governance to oh uh one in uh buil a system this uh Fusion thing is where as I said resolvers they can uh execute professionally trades and compete with each other the way why they can participate in this thing that they should have enough delegations this means that people can stake and delegate their assets to those resolvers and resolvers they come compete on the market for user orders and they also compete on these delegations so the the way the clear way for them to compete for delegations is to share their revenue they have Farm to incentivize everyone who delegated them proportionally to their delegation so people stay for some period of time they get this uh uh voting power which is kind of exponential to the lock period and whenever it's been delegated you will get rewards from this uh resolver and you can red delegate to other resolver so what people usually do they equilibrate and rebalance those yields from different resolvers so resolvers compete with their sharing Revenue with users to being a able to proceed uh resolving of orders so that's system which puts resolvers uh and makes them share their revenue to compete in two different areas competing for order flow and competing for delegations all right got it uh I think we have to do one one last question and it's for summery how can someone get started with summery and why should they uh so you can just go to su. it's as easy as that uh and uh uh why why should you well um uh it's if you want to go to the best place to borrow and earn in defi that's uh why you should go there uh so so you can uh go long uh a long list of assets uh go short a long list of assets all in defi both on uh mayet arbitrum base and optimism and uh lastly on um uh uh like with this new uh permissionless protocol called Ashna which is basically the Unis swap of uh lending uh you you can uh go long any token so if you have a Anon token uh that you want to Long uh you can just uh create a pool of anon eth and go long Anon eth nice also sui doesn't have a token yet FY long Anon token to what asset to e oh all right sounds bullish I think we're we're running out of time uh the the just before I wrap up one more question I'll pose uh cuz we have a few hackers here cuz it's a hackathon uh one sentence advice to hackers let's start with sufy just try just try um I I I can advise that serious a quick one Anon a quick one short one short one serial building works yeah you should be serious builder in Def so yeah um I guess like their first iteration never going to be that good so don't get disappointed by it all right awesome thank you everyone let's give a hand of Applause for the panel thank you guys [Music]