GM, this is your Daily Bolt briefing.
In this edition, we’ve included more in-depth analysis of the popular and important projects that our readers have come to expect.
Learn how infrastructure builders like RISC Zero, Celestia, and Soveirgn Labs are integrating ZK Proofs
Get the scoop on Stella, a leveraged strategies protocol rebranded from Alpha Finance.
Stay alert in the markets ⬇️
1/ Celestia - Exploring ZK Proofs within the Modular Stack
Preview: Nick hosts Brian, Yi, and Preston to discuss Zero-Knowledge Proof for the blockchain and more! Click here to listen to the full episode (93 mins).
Read our Note (13 mins) and save 80 mins.
Here are some key takeaways:
Brian Redford says that RISC Zero is working on making zero-knowledge technology accessible to anyone by leveraging existing code bases. RISC Zero’s core open-source technology is the RISC Zero zkVM, which implements the RISC-V instruction set. RISC Zero’s focus is on maturing this technology and launching its high-speed proving network, Bonsai.
Yi Sun explains the creation process of ZKP from a computer program involving two steps: translating the program into a ZK-circuit and applying a cryptographic algorithm to prove the program's successful run.
Nick asks about the main barriers to ZKP’s wider adoption, including the cost of generating ZKP, their slow speed, difficult developer experience, and security concerns.
Brian believes that the system's maturity is preventing ZK from being adopted more widely. He highlights the need for infrastructure to be easier for users to access.
Preston adds that there's confusion about the security of zk-SNARKs. There are two aspects to security: the underlying protocol and the implementation of the protocol. He suggests that most risks are with new implementations, not with the protocols, which are based on well-understood and studied hash functions.
Nick asks about the cost associated with ZK-proofs, like proving one roll-up block.
Brian recognizes the high cost but sees the costs dropping significantly and expects significant performance improvements in proving systems due to ongoing research and development efforts.
Preston says that cost is indeed a factor, but in the blockchain context, the cost of data posted onto L1 tends to dominate the total price. He mentions Polygon's zkEVM, which claims a very low per-transaction cost.
2/ Arbitrum x Stella Protocol Twitter Space
Preview: Churro hosts Tascha from Stella Protocol to discuss Stella Finance, Zero-Cost Leverage, and more! Click here to listen to the full episode (40 mins).
Read our Note (3 mins) and save 54 mins.
Here are some key takeaways:
Tascha explains that Stella is a leveraged strategies protocol that allows users to take leveraged positions on different DeFi strategies at a 0% borrowing cost. She highlights how Stella works to ensure that incentives are aligned for users and lenders by taking a profit cut when leveraged positions are profitable.
Tascha talks about her journey in the crypto world since 2016, her initial involvement with Alpha Finance in 2020, and how they rebranded Alpha Finance to Stella.
Churro asks whether users get liquidated when their positions are down, Tascha confirms that they do but there are no additional liquidation costs involved.
Tascha says that Stella protocol simplifies the process for users through their platform. Users can input their capital, decide on their leverage, and Stella handles the rest.
Tascha talks about how Stella ensures the protocol remains solvent by keeping borrowed funds in the smart contract as collateral. From the user's perspective, it appears under-collateralized while from the protocol's perspective, it is over-collateralized.
Tascha explains that if a user's funds are in a leveraged position, they can't be used for anything else, but users can also simply lend their assets on Stella.
She highlights the unique advantage of Stella's lending program where the lending APY is a yield cut from the leveraged positions, leading to potentially higher returns for lenders.
Tascha says that the LP token on the protocol acts as collateral and is kept on the smart contract for quick liquidation when necessary.
Tascha talks about the issues with misaligned incentives in current DeFi protocols, especially for borrowers. She explains Stella's new model, which removes interest rates, allowing borrowers to avoid upfront costs and only pay from their profits (pay-as-you-earn). This profit cut is then given to lenders as a lending APY.
Churro asks about Stella's plans with Uniswap v4. Tascha says they're looking into it, but their near-term roadmap includes integration with Trader Joe's liquidity pool on Arbitrum and collaboration with Radiant and GMX.
If you read these 2 Notes on Revelo Intel you would have saved: 2 hours and 14 minutes!