GM, this is your Daily Bolt briefing
This year, more OG projects have launched their own stablecoins, namely Curve’s crvUSD and Aave’s GHO. In this edition, we’ve included some notes on Sommelier’s new GHO strategy vault, currently yielding ~13% with just under $2M in TVL.
We’ve also included some notes featuring BloXroute Labs, a protocol that provides mempool services, block streaming, and other DeFi performance services. Learn about the implications of MEV and the future of arbitrage in crypto markets.
Over and out ⬇
1/ Sommelier Finance Twitter spaces - Turbo GHO Launch
Preview: Josh Kessler hosted Sun and Stephen to discuss Aave GHO Vault, yield, liquidity, strategy, and more! Click here to listen to the full episode (37 mins).
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Josh asks Sun why they designed a vault specifically for the Aave community and the GHO ecosystem.
Sun explains that the Turbo GHO vault aims to offer best-in-class yields and solve liquidity issues within the Aave ecosystem. He says the vault is part of a broader goal to improve UX and the efficiency of DeFi ecosystems. He mentions that this new vault will help the Aave ecosystem by optimizing GHO yields and solving inefficient liquidity problems that many ecosystems face.
Stephen says the vault acts like an index of yields with different strategies to fix the mentioned issues. He mentions tick optimization in Uniswap V3 as one example.
He says that their teams have proven to be efficient liquidity optimizers, making up a small percentage of total liquidity but routing a high volume of trades. Stephen says they can replicate this efficiency for GHO, thereby benefiting its peg.
Josh questions the team's expertise in Uniswap V3 and asks them to compare their vault capabilities and performance relative to other protocols like Gamma, and Bunny. He asks about the importance of multi-strategy vaults instead of relying on a single yield source.
Stephen begins by expressing respect for other protocols like Bunny, Balancer, and Maverick. He explains that their vaults use a combination of art and science, leveraging off-chain computation for better optimization. He says that their vaults can also act on narratives that are not quantifiable on-chain. Stephen says that in terms of liquidity optimization, their vault is a hundred times more efficient than Bunny and thirty times more efficient than Maverick.
Sun explains that dynamic liquidity management is superior to passive management because it can adapt and leverage information from the market.
He mentions that the next advancement in the space is the use of multi-strategies over single strategies for better scalability and risk mitigation. Sun highlights that automating liquidity management is key, and the goal is to create protocols that can automatically switch strategies based on market conditions.
2/ 0xResearch - MEV Boost Transaction Life Cycle
Preview: Dan and Sam are joined by Uri to discuss MEV boost transaction life cycles, Searcher/Builder integrations, and more. Click here to listen to the full episode (72 mins).
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BloXroute Labs is a protocol that provides mempool services, block streaming, and anything related to DeFi performance.
He describes front-running, back-running, and sandwiching as methods to exploit MEV.
Uri raises concerns about centralization, especially when large validators have in-house expertise for MEV extraction.
He discusses the centralizing force that could make large validators disproportionately more profitable.
Uri talks about the concept of block builders who create blocks and offer them to validators.
He explains that this approach helps in preventing centralization among validators.
He points out that this shifts centralization to the block-building area, with a few builders dominating the market.
He discusses the emergence of private order flow and auction mechanisms to avoid front-running.
He describes how these services promise not to front-run but may still extract some value from transactions.
Uri highlights the trust issues between block builders and validators. He introduces the concept of relays as trusted entities that sit between builders and validators to facilitate transactions.
Uri states that most builders are also involved in CeFi, which is the biggest piece of MEV.
He explains that CeFi arbitrage is risky and requires significant capital, making it a game for large financial players.
He notes that builders wait until the last possible moment to make their bids to minimize risk, as they have to account for real-time price changes in both CeFi and DeFi.
He envisions a future where DeFi and CeFi affect each other in real-time, making DeFi more than just a "sidecar" to CeFi.
He highlights that DeFi is currently not as competitive as CeFi, using BTC trading volume as an example.
Uri criticizes the normalization of front-running in the DeFi space, emphasizing that this is the main issue people have with high-frequency trading in traditional finance.
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