Meow DeFi #2 - Tokenomics Bloat

Henlo reader. Is it me, or DeFi been losing its way lately? Instead of designing better and better products, more and more attention has shifted to designing elaborate tokenomics.

You could rightfully say that this has been going on for a while. In a span of just a few years, we went from simple “here is TOKEN - stake it” to “here is TOKEN - go read four pages of docs to understand what it does”. Maybe that’s how it should be, but it doesn’t help adoption.

Not only do complex tokenomics make things difficult for newcomers, but they can also be cleverly used to obfuscate nefarious or shady stuff. Terraluna is a case in point. How many people thought LUNA backed UST?

Obviously, there are some benefits to complex tokenomics, but when a user has to deal with “bribes”, “flywheels”, and “vote escrow” just to use a DEX, something certainly went wrong.

I’m a big fan of PlutusDAO, but have you seen their new tokenomics? In addition to the $PLS token, there will be $esPLS, $bPLS and $bbPLS. Good luck figuring out which one does what.

Overall, it feels like rather than designing tokens for adoption, many protocols are creating tokens for an increasing, but still very tiny, number of DeFi degens. “Tokenomics made for threads” instead of “tokenomics made for people”. Realistically speaking, it’s not even protocol’s fault - that’s the current meta, and I can’t see it changing anytime soon.

Anyways, that’s all I have to say on the subject; let’s look at something more positive.

SteakHut

There's not much to say; SteakHut is great and launching steaking in May. They’ve been cooking for a while, so hopefully, the stake is tasty.

It somewhat coincides with the ongoing LB v2.1 upgrade, which is a bullish synergy.

Savvy DeFi

Savvy is a yield-leveraging platform (inspired by Alchemix) that was going to launch on Avalanche. But stuff happened, and they’ve stopped LGE to now launch on Arbitrum.

Having conflicting thoughts on this one as it, IMO, highlights a broader problem in DeFi eco, which basically boils down to “If you are a new protocol, why aren’t you launching on Arbitrum?”. In this case, Arbitrum can be replaced by zkSync or any other hot new chain. The opportunity cost of not being where all the cool kids hang out is too high, and liquidity is still too limited across alt L1s.

Launching a token on Arbitrum seems surprisingly hard atm, so let’s see how this goes.

Berachain

Speaking of the next hot chains, the longest-running Meme in DeFi turned is actually not a meme. Berachain announced a Private round and incentivized testnet.

I feel like I’ll talk a lot about Berachain and protocols on it in the coming weeks, but TLDR is that it’s a Cosmos L1 Proof-of-Liquidity consensus.

PoL is different from traditional PoS in that it:
1. Allows users to stake assets like ETH, BTC and stables into a validator
2. Keeps those staked assets working in the ecosystem (e.g., through liquidity provision on a DEX).

Pretty cool stuff, and the memes are top-notch.

Memes

Memes have been running wild for the past week in general, with seemingly random stuff pumping for seemingly no reason.

There is no consensus on whether or not $PEPE pumping is bullish or bearish, but always nice to see random crap having higher mcap than legit projects building the future of France. Crypto, please never change.

Smilee

There is no news here other than that their testnet is ending soon. If you aren’t familiar with Smilee, it’s a protocol that allows anyone to short or long volatility for their favourite crypto tokens.

Because Impermanent Loss is a by-product of volatility, you can essentially turn it into Impermanent Gain through Smilee. Considering the recent crypto volatility, it seems like a perfect instrument to either hedge or gamble more.

For a long time, people tunnel-visioned on “preventing IL” (e.g., Bancor), but IMO an approach where IL is turned into a feature, not a bug, has more potential. No date for a full release yet, but certainly something worth keeping an eye on.

Merlin and eZKalibur

Merlin and eZKalibur are (sort of) Camelot forks on zkSync, and are not yet launched. That’s pretty much all there is to say about them, but last time I faded Camelot, it didn’t end well, so I figured I’d include it here so if they do 10x, I can claim that I knew all along (I don’t know).

Now that I think about it, eZKalibur is actually an awful name for a DEX, but good names aren’t what DeFi is famous for (quite the opposite).

Either way, zkSync is still a wild west atm with stuff rugging left and right and forks on top of forks. Can someone pls just bring LB there?

Meow

That’s all I have this time around, will bring more rants and potential rugs next week. Hope you enjoyed it, and stay safe out there.

Disclawmer

This is a work of fiction. Names, characters, protocols, events and incidents are the products of the author's imagination. Any resemblance to actual persons, living or dead, or actual events is purely coincidental. Not financial advice.