GM, this is your Daily Bolt briefing
You may have been hearing more about oTokens. Projects like Retro Finance and Bunni (read our insight on their tokenomics here) are leveraging call options to reduce reliance on inflationary emissions.
In today’s edition, we’re giving you notes from Tapioca DAO’s recent podcast where the team discusses oTAP and the origin of oTokens.
We’ve also included notes on the state of LSTs on Cosmos, and how stkATOM could finally make ATOM a viable token for the ecosystem.
Keep your guard up in the markets ⬇
1/ Tapioca DAO – Introduction to Tapioca’s Tokenomics
Preview: twMatt, 0xRektora, and uBenjammin talk about Tapioca’s tokenomics and discuss $TAP, oTAP, twTAP, and twAML. Click here to listen to the full episode (73 mins).
Read our Note (9 mins) and save 64 mins.
Here are some key takeaways:
Tapioca DAO is a fully omnichain permissionless money market
0xRektora says that the Tapioca protocol is described as a positive feedback loop where each component reinforces the subsequent one. It starts with Big Bang and continues with Singularity, twAML, oTAP, and twTAP before returning to Big Bang. This positive feedback loop is designed to sustain growth during bull markets and withstand damage during bear markets. It follows a logarithmic curve rather than a linear curve, allowing for rapid growth during bull markets and damage control during bear markets.
uBenjammin says that the main goal of Tapioca tokenomics is to avoid giving up something for nothing. The protocol aims to bring in value through liquidity and use that liquidity to create further value for the protocol. Liquidity is used to create further value for the protocol, ensuring that there are no free lunches.
twMatt says that Tapioca adopts a protocol-owned liquidity mindset to capture liquidity effectively. He argues that running a liquidity mining program for an extended period results in zero or negative value. He contrasts this with Tapioca’s DSO (DAO Share Options), which can lead to a treasury worth hundreds of millions of dollars after four years.
twMatt says that the goal of Tapioca is to become the preeminent decentralized stablecoin issuer. This puts Tapioca in competition with other protocols such as Maker, Aave, and Curve. Tapioca aims to differentiate itself by offering unique and creative features.
twMatt says that Tapioca’s article on liquidity mining played a role in changing people's perception of its sustainability. Many protocols have adopted call options as incentives after reading the article. However, they acknowledge that call options as incentives were not invented by them but by Andre Cronje in 2021 with Keeper Network.
He adds that the purpose of oTAP is to emit TAP tokens through call options. The goal is to move away from the idea of creating tokens out of thin air, which resembles Ponzi schemes. oTAP allows users to trade time for discounts on acquiring TAP tokens. He says that the concept is similar to how government bonds work, where time can be exchanged for something valuable.
twMatt says that employee stock options served as inspiration for oTAP. Companies often compensate employees with stock options, providing them with an opportunity to acquire company shares at a specific price. In oTAP, lenders and shareholders are given call options on a governance token. Call options grant the right but not the obligation to buy an underlying asset within a specific period at a predetermined price.
He adds that oTAP call options have a one-week expiry period. Users can receive discounts ranging from 5% to 50% off the market price when acquiring TAP tokens through oTAP. Each week of lock-in maintains the same discount percentage, setting the strike price for future exercises. The discount allows users to acquire $TAP tokens at a lower cost during their lock-in period. The profit is determined by the discount level.
2/ Cosmos Hub - Exploring the Atom Economic Zone
Preview: Robb Aidan, Riley, and Jehan discuss Stride’s launch on Atom Economic Zone, the latest updates from the protocol and more. Click here to listen to the full episode (55 mins).
Read our Note (5 mins) and save 50 mins.
Here are some key takeaways:
Stride is a liquid staking protocol for Cosmos blockchains.
He says that Stride’s journey started with the first draft proposal in April 2023, the signaling proposal in late April 2023, and the final proposal in June 2023.
Aidan says that the journey started even earlier, around September 2022, when the Stride team first started discussing Inter-Blockchain Communication (IBC) and how it could be a good fit for Stride.
He says that the benefits of IBC, including economic security and alignment, were key factors in their decision to join the Atom Economic Zone. These benefits could be achieved without giving up much sovereignty, which was a significant advantage.
Aidan says that he believes in the importance of economic security and alignment in interchain security.
He says that the Cosmos Hub validator set running logic on Stride has significantly boosted economic security and reduced the risk of the validator set stealing funds. He says that this makes Stride a secure interchain liquid staking provider.
He says that there is a potential for liquid staking to be a decentralizing force on the Cosmos Hub, countering the narrative that liquid staking is a centralizing force.
He says that by providing more options for staking, liquid staking can actually lead to a more decentralized and diverse validator set.
Aidan expresses his view that liquid staking is a winner-takes-all market due to strong network effects. He thinks that the most secure liquid staking provider is likely to attract the most users and become the market leader.
Aidan introduces Stride's proposal for protocol-owned liquidity (POL). The proposal involves using the 450,000 ATOM provided as part of Stride's Inter-Blockchain Communication (IBC) proposal to contribute to a STATOM pool on the Neutron blockchain.
He says that this move is aimed at establishing ATOM as the default token in Cosmos DeFi. By contributing a significant amount of ATOM to the liquidity pool, they can increase the liquidity of ATOM and make it more attractive for users.
Aidan says that there are several benefits of this proposal for Stride as by contributing to the liquidity pool, Stride can provide a sustainable path towards bootstrapping deep liquid staking token (LST) liquidity in the Cosmos.
Riley emphasizes the importance of POL and the role of the Cosmos Hub in providing liquidity to the ecosystem. He says that there is a need for the Cosmos Hub to become a partial owner of the chains surrounding it through POL as this would create a more integrated and mutually beneficial ecosystem.
If you read these 2 Notes on Revelo Intel you would have saved: 1 hour and 54 mins!