GM, this is your Daily Bolt briefing
As most of the market has noticed, LSTs have been a dominant narrative in DeFi, being the category with the most TVL. With an ETH ETF potentially looking much more likely, there’s perhaps never been a better time to get involved with some of the newer LST protocols…
In this edition, we’ve included notes on Swell Network, an innovative LST protocol that has recently implemented new ways to earn rewards.
Over and out ⬇
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1/ Swell Network Twitter Spaces - Introducing the Sommelier swETH Vault
Preview: Kizen hosted Abhishek, Sunand, Stephen, and Josh to discuss Sommelier Vaults, DeFi liquidity, LSTs, and more! Click here to listen to the full episode (48 mins).
Read our Note (5 mins) and save 43 mins.
Sommelier Vaults: A New Era in Liquidity and Optimization
Abishek works with Swell on research related to liquidity strategy, including managing pools and ensuring proper liquidity. He is excited about the Sommelier Turbo swETH vault.
Sunand talks about Seven Seas Capital, a data science company that also does smart contract work and vault building. He highlights the novel aspects of the vault that are unique to Sommelier.
Josh explains that Sommelier is a platform for decentralized vaults that are cutting-edge because they can adapt to real-time market information and dynamically adapt to market conditions. He highlights that these are not just "dumb auto compounders" but intelligent vaults that can respond to changing conditions.
Stephen adds that people have always wanted intelligent vaults that can adapt to new strategies and yield opportunities over time. He provides examples of how Sommelier vaults have adapted to different strategies and highlights their intelligence and adaptability.
Sunand explains that they offload computation off-chain and use a consensus mechanism to execute strategies. He describes the collaboration between strategy teams and the use of Cosmos tech to enable more interesting vaults.
Kizen asks about the tech optimization, which seems fundamental to the swETH vault.
Sunand explains that Sommelier was created to address the increasing complexity of DeFi apps like Uniswap. He discusses how traditional architectures can't keep up with the rate of progress and how Sommelier vaults optimize yield through tick optimization.
He provides examples of how Sommelier vaults have become successful LPs in competitive pools, highlighting the value that Sommelier tech brings to the community.
Kizen says that the swETH vault is now live. He mentions that the vault is eligible for Swell pearls and asks the benefits of the vault from the perspective of a liquidity provider (LP).
Stephen explains that the swETH vault offers highly optimized liquidity through tick optimization, resulting in reduced slippage and price impact.
He highlights that the vault's efficiency has allowed it to attract significant volume and generate more fee revenue. He mentions that the vault will help stabilize the price of the asset as more TVL goes in.
Josh adds that tracking different opportunities in DeFi is time-consuming and costly in terms of gas fees.
He highlights that the vault simplifies the experience for users by handling complexity and optimizing opportunities without ongoing gas costs. He sees benefits for both small depositors and those who don't want to spend all day monitoring their positions.
Kizen asks Abishek to comment on the appeal of the vault from Swell's perspective.
Abishek highlights the difficulty of managing concentrated liquidity and praises Sommelier's decentralized approach. He looks forward to seeing how the vault performs and sees it as a crucial part of Swell's mission to allow efficient withdrawals and augment liquidity.
Kizen asks for an explanation of how the vault might help defend the asset's peg.
Sunand explains that the vault acts as a professional liquidity provider, responding to market conditions and creating buy pressure for the asset.
He describes how the vault can capitalize on market inefficiencies to buy and sell at fair prices, making markets more efficient. He expresses optimism about the vault's potential to enhance liquidity in the Swell ecosystem and praises Swell's innovation in shaping liquidity.
Depegs in LSTs: Vault Performance Strategies
Josh asks Stephen to discuss the concept of micro-depegs in liquid assets like LSTs and how taking advantage of these can enhance the vault's performance. He wants them to highlight how black swan events present opportunities for the vault.
Stephen explains that Liquid Staking Tokens (LSTs) are almost always depegged by some minute percentage. He describes how a data analytics firm can run off-chain computation to look at the depeg and set parameters that allow the vault to enter at a favorable ratio, gaining intrinsic value appreciation from mean reversion.
Sunand highlights that the market is highly emotional and irrational, especially during black swan events. He gives examples of market inefficiencies that arose during such events and how they presented opportunities to buy cheap assets or lend at attractive rates. He talks about specific inefficiencies in less liquid markets and how the vault can capture these opportunities.
Josh asks Stephen to discuss how the vault adapts to market conditions and evolves its capabilities, especially as the asset gets more integrations on different protocols.
Stephen explains that the vault has a set of adapters that integrate with different protocols, allowing it to operate within various ecosystems and execute interesting strategies. He highlights that the vault can adapt to new opportunities, such as leveraged staking or new integrations, and can be expanded to tap into specific yields, creating a scalable index of yields.
Q&A
Q: What strategies will the Sommelier swETH vault be deploying at launch, and what are some of the strategies planned down the line?
Sunand mentions initially, the Sommelier swETH vault will primarily focus on Uniswap V3 swETH-ETH pool management. Maverick and Pendle look interesting, but there's no Maverick adapter yet. They're excited about new integrations and will add attractive strategy opportunities from recent integrations.
Stephen says the vaults are risk-adjusted and don't attack any yield. They aim to preserve a consistent share price and avoid unnecessary volatility.
Q: Will the swETH vault accept ETH as a deposit asset?
Kizen says the vault will accept ETH as a deposit asset. He highlights that the Turbo swETH vault will get double the pearls.
Adam asks Corey about the Pause Sentinel feature in Dolomite. Corey explains that Pause Sentinel allows Dolomite to shut off a part of the market in real-time if an asset is compromised, thereby reducing spillover effects and enhancing risk mitigation.
Adam asks about the cap on PT-GLP. Corey says that they are planning to raise the cap from 500,000 units to 1 million units by the end of August, 2023, as they have observed responsible usage of the asset on Dolomite.
Corey discusses the yield-claiming feature for YT-GLP on Dolomite. Users can claim yield on the total amount of YT-GLP deposited, regardless of how the assets are split between the borrow and balance pages, simplifying the user experience.
Adam asks about the future plans of Dolomite. Corey mentions they're looking to support Pendle AMM LP tokens and are excited about expanding liquidity for YT assets.
Bobo asks Vu about the possibility of bringing real-world assets (RWAs) to Arbitrum. Vu says that Pendle is open to this idea and will let Dolomite know if they proceed.
Corey talks about Dolomite's roadmap, which includes new features for the web app and protocol. They plan to release limit orders to enhance portfolio management and strategy execution.
Adam mentions Dolomite's Community XP program. He encourages everyone to claim their XP and join Dolomite's Discord for more updates on the program.
If you read these 2 Notes on Revelo Intel you would have saved: 2 hours and 16 mins!
Passionate about web3 products?
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Finally! No more fake reviews!
Whether it's NFTs, DeFi apps, web3 games, or wallets, you'll find reviews for all your favorite web3 products. Search for your product, and get insights straight from the community.
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Write a review about it today!
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