DeFi & AI are the Opportunities of our Lifetime || Be kind, do good things || Opinions are my own || BD & GTM @ Highway ||
Joined May 2020
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$BTC indeed
I wish the debate over where the 10-year Treasury yield “should” be would acknowledge one possibility:
During the life of that 10-year bond, this image will likely become normal.
Humanoids working through the night. AI agents operating 24/7. Economic output no longer constrained by human working hours.
AI compresses productive time. (See Anthropic ARR) Debt was underwritten on human time.
You don’t have to believe this is the base case. But it has to be somewhere in the probability distribution.
The 10-year yield debate is effectively the same debate we’re having over AI infrastructure:
Can machine-time ROIC outrun human-time financing costs?
Same question. Different balance sheet.
Who ultimately wins the fight between the old system and the new system where the govt just prints waiting (hoping) for AI to win. For me it is, BTC
$USYC 3B. $BUIDL 2.5B. BENJI 2B. Tokenized Treasuries are real. What's missing IMO: the layer that makes them usable as collateral across every venue.
TradFi built repo and sweep accounts for this. Crypto hasn't built its equivalent yet.
The treasury layer for on-chain capital is the next big piece of infra.
Institutions hold productive assets. They want #DeFi exposure. They don't want to sell.
TradFi solved this with repo decades ago. On-chain, that infrastructure didn't exist. It does now.
Same assets. Same yield. New utility.
🤖 Made with AI
Tokenised Treasuries: $15.8B. USYC $3B. BUIDL $2.5B. USDY $2.16B. BENJI $2B.
USYC and BUIDL are already accepted as institutional collateral on @binance and Crypto[.]com. Utility is happening - but most tokenised #RWAs still sit idle.
Wave one: tokenise. Done.
Wave two: make them usable everywhere. That layer is being built.
🤖 Made with AI
1/ Perps platforms hold billions in OI. Almost all of it in USDC. Almost all of it earning zero. @variational_io $1.1B. @Lighter_xyz $770M. @GMX_IO. @avantisfi.
The pattern is the same everywhere.
4/ The platforms that offer productive margin first don't win on tech. They win on capital efficiency. Capital is lazy - it goes where it's treated best. 🐑
This is pretty insane
Maybe a bit much for a Tuesday though 😅
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JonnyDefAI 👾 retweeted
The KelpDAO situation is moving fast.
$230M in bad debt
No resolution in sight
And everyone's blaming each other
Here's the latest updates from the last 24 hours:
A decent post from @duonine re: @Aave rsETH cluster f@*k
It’s worth trying to understand the mechanics at play here..
Risk vectors that may have been overlooked all in the name of more TVL..more markets
And this all came about because @KelpDAO chose to centralise their @LayerZero_Core validator setup..
(Lazy- and ultimately customisation bit them in the ass)
And then what also now looks to be lazy/ influenced acceptance of new (structurally risky) markets by Aave
Oh yeah and then those nasty N.Korean Lazarus mfers rearing their ugly heads again.. 🫣 and putting the domino’s in place
🚨 I don't think people realize how bad things are at @aave right now.
All core markets are at 100% utilization, that includes $3 bil in USDT and $2 bil in USDC stuck!
That means you CAN'T WITHDRAW your money!
A long post on why and how we ended up here.
When the rsETH exploit happened and AAVE incurred bad debt, whales like Justin Sun, MEXC exchange, and others immediately withdrew billions from AAVE.
This instantly drained all available liquidity in key core markets like ETH, USDT, USDC and so on. Those first to withdraw got out, laggers got trapped.
Initially, the ETH market hit 100% utilization, meaning you could not withdraw your ETH from AAVE.
Worse, this also means the protocol can't process ETH liquidations should ETH price fall/crash. If you can't sell any ETH, you can't liquidate to cover debt obligations.
That means the risk of more bad debt incurred by AAVE is increasing the longer its markets remain stuck.
Nevertheless, users can still sell at a minor loss the aETHwETH tokens on Uniswap or similar aggregators. That exit door is the last one remaining for ETH depositors on AAVE.
The same cannot be said by depositors of USDT and USDC. They are stuck.
That's because AAVE lost over $6 billion in liquidity in the past 24h. As whales took out their money, USDT and USDC also hit 100% utilization.
These markets are now also stuck with money locked. Panic is spreading and desperate times call for desperate measures.
Some users decided to borrow against USDT/USDC and exit via other markets at a 10-25% loss (90-75% LTV). Basically you borrow GHO/DAI/USDe against your locked USDT/C.
But as more liquidity leaves AAVE, more markets get to 100% utilization and get locked/stuck due to low liquidity. This is quickly cascading across all available markets.
Luckily the crypto market was rather flat today so liquidation risks were marginal, but if things change there are billions in stablecoins and other assets locked on AAVE that can't process liquidations = more bad debt for AAVE.
If users or related protocols that are stuck need access to their money to prevent liquidations or other critical function, they have a huge problem on their hands.
Plus, nobody wants to deposit (or provide liquidity) in these markets now since your ETH, BTC, USDC/T could be stuck there for who know how long.
As soon as any available liquidity is made available, it is instantly taken out by bots fighting to get out. As I wrote this I saw 250k in liquidity on USDC vanish in seconds.
Then there is the bad debt question.
There's over $200 mil in bad debt incurred by AAVE via rsETH that's like a hot potato. Nobody knows who will eventually pay this bill.
If you didn't remove your assets from AAVE, you risk receiving at least part of that bill in some form. Not having access to your money is part of that risk too.
Contagion is also extremely high.
Many protocols and apps rely on AAVE for their earn mechanics. These protocols and their users are stuck too and may be forced to incur bad debt with no fault of their own.
October 10th was a CEX driven crash, this is a DeFi risk mitigation failure of epic proportions.
AAVE should have never onboarded rsETH as a collateral asset, at least not to the size of hundreds of millions that allowed the hacker to walk away (i.e. borrow) over $200M in ETH after posting fake collateral.
Rumors on X are saying rsETH was onboarded by AAVE due to a conflict of interest (lobbying) by a given service provider. If true, this is a major failure of its governance structure (nothing new).
The folks at @KelpDAO who manage rsETH also have a tough decision to make on who will actually pay for the $200M exploit. AAVE users? L2 rsETH users? Everyone affected gets a haircut to account for the loss?
The AAVE team and its founder, Stani, have been quiet for over 20h since the exploit after initially announcing the rsETH market freeze.
They have a pretty big problem on their hands since the whole protocol is at risk right now. Trust is already lost as AAVE is bleeding billions in TVL to the level of hitting 100% utilization on all core markets.
Maybe some key actors in the space will step in to provide liquidity to stabilize the markets on AAVE before this gets even worse.
I got lucky to get out of AAVE early when I first saw this. I also removed all assets from DeFi and will not touch any protocol in the next few weeks. Too much risk for a few percentage points in yield.
If you found this informative, like, share, and follow @duonine
> The audit doesn't make Tether safe.
> It makes Tether knowable.
Those are very different things.
Has transparency arrived, or have we just gotten better at hiding in plain sight? 👇
#Tether #Stablecoins #USDT #CryptoRegulation
Interesting development
Today, Drift is announcing a collaboration with @tether and other partners totaling up to nearly $150 million to support our commitment to a relaunch with USDT at the center, and a path to user recovery.
These funds encompass a $100M revenue-linked credit facility, an ecosystem grant, and loans to market makers, designed to fund a dedicated user recovery pool.
Learn more 👇
$280M. A lawsuit. And a stablecoin switch nobody saw coming.
@DriftProtocol got hit for $280M in one of the biggest DeFi exploits of the year, linked to North Korean actors. (OMG - those damn N.Koreans again..)
The fallout: @circle is now facing a lawsuit over the breach & at least a dozen other crypto entities are caught in the contagion.
The twist: Drift ditched USDC and tapped @tether for a $148M recovery program. USDT is now the protocol's stablecoin going forward.
I mean if you think about it, it's a huge move by Drift (& Tether), whilst at the same time, a really big Fail by Circle
In the middle of a crisis, a protocol under maximum pressure made an active choice to move away from the regulated, US-compliant stablecoin toward the one that just hired KPMG and PwC to audit $185B in reserves.
To me, this is a really clear signal about where confidence actually lives in DeFi right now, regardless of what the regulatory narrative says.
Security. Liquidity. Speed of response....Liquidity and more Liquidity 😜
When it matters, those "three things" beat compliance optics every time.
I really hope that Drift can recover from this exploit, not only for @solana and their DeFi ecosystem - but for the greater good of DeFi as a whole.
Today, Drift is announcing a collaboration with @tether and other partners totaling up to nearly $150 million to support our commitment to a relaunch with USDT at the center, and a path to user recovery.
These funds encompass a $100M revenue-linked credit facility, an ecosystem grant, and loans to market makers, designed to fund a dedicated user recovery pool.
Learn more 👇
That is interesting
Of the 3 “quantum-proofing” options for BTC - like in all of them, a lot of people are going to lose a lot of @Bitcoin
#BTC
"I love it when people who have absolutely no idea in the subject speak about the subject."
@IOHK_Charles didn't just argue quantum is a real threat. He laid out his credentials and then walked through the math.
→ Worked on NIST standards
→ 250+ research publications
→ Wrote the first paper on Bitcoin vs. quantum adversary (2019)
→ Building post-quantum systems
→ References DARPA QBI: 11 companies through phase one
→ Greater than 50% probability of quantum capability by 2033
Bitcoin's three quantum options:
→ Option 1: Do nothing. Entire system breaks.
→ Option 2: Soft fork. Add post-quantum signatures. 15-20% of supply gets stolen from vulnerable legacy keys.
→ Option 3: BIP 361. Force migration. Freeze non-migrated coins. ~1.7 million BTC lost. Mostly Satoshi's.