The Weekly Trifecta #1: 7/2 - 7/8

Breakdown & Analysis of Under-the-Radar News from the Past Week

Jul 10, 2023

Welcome to The Weekly Trifecta

gm! Welcome to the first edition of The Weekly Trifecta, a weekly newsletter where I will be breaking down and analyzing three different under-the-radar events from the past week in the crypto industry. The goal of this newsletter is to cover small events that typically do not get pick up by major crypto news outlets, and not large events such as SEC lawsuits or BTC ETF filings.

Please feel free to subscribe for future editions of the Weekly Trifecta and share this post if you enjoy it!

Flashstake: Flash 2.0

Flashstake is a fixed-income DeFi protocol that allows users to earn upfront yield on a variety of yield-bearing assets, such as liquid-staked ETH (stETH, rETH), stablecoins (USDC, sUSD), and GLP.

Breakdown

On July 5, 2023, Flashstake announced Flash 2.0, a revamp to the Flashstake protocol that will include changes to its tokenomics, architecture, and governance. As a part of the revamp, there are three primary goals that will be executed in three separate phases:

Phase 1: veToken Model - In the first phase, Flashstake plans on introducing a veToken model for its own FLASH token. veFLASH tokenholders will vote for Time Vaults, staking vaults where users can receive up-front yield from, and in return, earn a portion of the protocol revenues generated by the Time Vault voted for.
Phase 2: Architecture Overhaul - In the current iteration of Flashstake, each Time Vault has its own associated liquidity pool. Flash 2.0 aims to remove the frictions caused by this fragmented liquidity by unifying liquidity for all Time Vaults through one “mega FLASH LP.”

Additional architectural changes include the ability for anybody to create a Time Vault, without the use of code, and the ability to bribe Time Vaults.
Phase 3: Governance - The Flashstake treasury is currently managed by a multi-sig consisting of core contributors. In Phase 3, Flashstake will be handing off control over the treasury from the multi-sig to DAO-controlled wallets.

Finally, Flashstake has reserved 7.5 million FLASH tokens (~$860,000 as of writing) for the Flash 2.0 Fund. Individuals and groups who help bring about the changes associated with Flash 2.0 will be eligible to receive FLASH tokens from this fund.

Analysis

Flashstake first alluded to Flash 2.0 on June 22, 2023, on this tweet. At the time, the price of FLASH was roughly ~$0.14. Prior to the official announcement on July 5, 2023, FLASH reached a local high of roughly ~$0.189 on June 23, 2023. As of writing, FLASH has since retraced the move up and is sitting at ~$0.115.

Although the Flash 2.0 brings about some exciting changes for the protocol, the market clearly saw this as “buy the rumor, sell the news” event. Going through each of the proposed changes, the ability to create “no-code” Time Vaults seems like the most promising. The rise in LSTs and on-chain RWAs could provide an interesting opportunity for Flashstake in the future. For example, imagine creating a “no-code” Time Vault for an on-chain T-Bill, and instantly earning 3%-5% yield up-front on it? I am personally excited to see what Time Vaults will be created from this upgrade.

As for the other changes associated with the Flash 2.0, the future removal of multi-sig wallets is a welcomed sight, but the veToken model feels a bit underwhelming. Flashstake may be trying to replicate the success of Pendle Finance and its veToken model.

nftperp: v1 Private Beta Shut Down

nftperp is a perps leverage exchange that allows users to long or short popular NFT collections, such as BAYC, Punks, or Miladys.

Breakdown

On July 6, 2023, nftperp announced that they were pausing all contracts related to its v1 vAMM model, which served as the foundation for its private beta. If you are unfamiliar with what a vAMM is, I recommend checking out this piece by Rage Trade. All WETH that was used as collateral within the vAMM was returned to users, ensuring that all users with open positions at the time of closing received their initial collateral back.

Due to “several internal team mistakes on liquidation logics and accounting error-,” nftperp had accumulated bad debt. As a result, the team behind nftperp will be backstopping this undisclosed amount of bad debt. As for users that were in unrealized profit at the time of the pause, their unrealized profits will be distributed pro-rata to them in the form of VNFTP tokens.

Further details regarding the shutdown will be released in the coming days, according to this tweet.

Analysis

In the words of Dan Robinson, “Please stop making vAMM perps.” They are ponzi schemes that rely on multiple parties to participate indefinitely for it to work. Thankfully, nftperp realized the drawbacks of this model before their exchange went public.

If you have read any of my past posts, you would know I’m pretty bullish on NFTFi. Although this is a pretty significant setback for nftperp and NFTFi in general, I don’t think this invalidates the “NFTFi thesis.” The failure of nftperp’s v1 AMM was because it was a vAMM, not because it had anything to do with NFTs.

Thankfully for nftperp, there is already an established leverage perp model that works at scale: GMX. I would imagine nftperp’s v2 model utilizes a similar model to GMX’s GLP model. Although this model has its own drawbacks, it should be good enough to serve as the basis for nftperp’s exchange.

Camelot Exchange: Accelerating Arbitrum Governance Proposal Update

Camelot Exchange is a decentralized exchange (DEX) on Arbitrum that aims to serve as the ecosystem’s “native DEX” by partnering with a variety of other Arbitrum-based protocols.

Disclosure: I hold positions in GRAIL, xGRAIL, and ARB.

Breakdown

On July 7, 2023, Camelot Exchange revised their Arbitrum DAO governance proposal: “Accelerating Arbitrum - leveraging Camelot as an ecosystem hub to support native builders.” The proposal aims to grant Camelot Exchange ARB tokens to fund liquidity incentives. After the revision, the proposal aims to:

Grant Camelot Exchange 1.5 million ARB per month, for 6 months (9 million ARB total). The allocated ARB will be distributed towards the following:
- 75% to ‘Ecosystem Builders’
- 15% to ‘Core Pairs’
- 10% to ‘Liquid Staked Derivatives’
A full breakdown of proposed ARB distributions by Camelot Exchange can be found here.
33% of the grants (~500K ARB per month) allocated to liquidity pools that adopt ARB as the base asset.
Monthly transparency reports with objectives and KPIs.
A multi-sig made up of ecosystem partners to safeguard the ARB grant. Additionally, Camelot Exchange will place its own ~2.19 million ARB in the multi-sig during the duration of the grant.

Analysis

Camelot Exchange’s proposal has brought about some serious debate in both the governance forums and on Twitter. Opponents of the proposal have two main issues with it:

This proposal formalizes Camelot Exchange’s status as the “native DEX” of Arbitrum, thus discouraging competition from other DEXs.
Liquidity incentives is not an efficient use of the DAO’s ARB tokens.

Whiles those concerns may be genuine, this proposal should be able to pass nonetheless. For this proposal to pass, it needs 3% of votable tokens to approve, and a simple majority. In layman’s terms, the proposal needs ~38.25 million (3% of Airdropped ARB tokens) ‘Yes’ votes to pass. Some back-of-the-napkin math shows that Camelot Exchange is nearly at those numbers already, assuming their “Round Table” partners vote with them (Camelot Exchange and PlutusDAO alone have a combined ~22.58 million ARB delegated to them). As long as no larger delegates, such as Treasure (~30.05 million ARB delegated to them), come out against the proposal, Camelot Exchange will be receiving 9 million ARB tokens.

Personally, I support this proposal. Although I wish Camelot Exchange had a mechanism for community members to dictate which liquidity pools will receive ARB emissions (Gauge system please!), Camelot Exchange in its current iteration should be good enough to properly distribute incentives. No other DEX on Arbitrum has made in-roads with the rest of the Arbitrum ecosystem as well as Camelot Exchange has, therefore, I’m pretty confident that no other DEX on Arbitrum would be able to distribute the ARB incentives as equitable as Camelot Exchange can.

Until Next Week…

If you’ve made it this far, I’d like to personally thank you for reading! If you enjoyed, please feel free to subscribe, share this, and leave some comments. Additionally, if you really enjoyed, also feel free to donate!

0x7ba9aa5E4caD26EA5E8ba4AC286E5d38Af91F62b

All the content I put out is free, so your donations are greatly appreciated! I’ll see you again on 7/17 for the second edition of The Weekly Trifecta!

The Average Joe’s Crypto

Discussion about this post