GM, this is your Daily Bolt briefing.
In this weekend edition, we’ll be detailing the Redacted Cartel ecosystem, from their governance incentives platform, to their upcoming Redacted Relayer. If you’re curious about what Redacted is building, and how their suite of products including Hidden Hand, Pirex and more interact, continue reading.
We’ve also made sure to include some interesting points of dialogue made by Crypto Twitter personality Loomdart on the likelihood and potential benefits of an FTX 2.0 reboot for FTX creditors.
Stay alert, stay informed.⬇️
1/ The Scoop - Loomdart Makes the Case for FTX 2.0
Preview: In this episode of The Scoop, Frank Chaparro is joined by Loomdart to discuss the reboot of FTX, the current market conditions, and more! Click here to listen to the full episode (27 mins).
Read our Note (7 mins) and save 20 mins.
Here are some key takeaways:
Loomdart believes the reboot of FTX (a bankrupt company that formerly operated a cryptocurrency exchange) should occur, and he thinks it should involve restructuring it as a new crypto exchange. He mentions that Sam Bankman-Fried (former CEO of FTX) is going to jail and won’t be the CEO of FTX 2.0 (reboot of FTX).
Loomdart emphasizes that FTX was fundamentally profitable, but the problems arose because funds from FTX users were being siphoned into a market-making firm that lost a lot of money.
Loomdart adds that he sees a possibility for FTX creditors to recover their losses and potentially make profits if they are given a stake in the new exchange. He also sees potential in turning the exchange's large user community into a community of invested stakeholders.
Frank Chapparo asks Loomdart how the value of FTX bankruptcy claims has increased. Loomdart explains that it was due to FTX's disorganized accounting practices. He reveals that a lot of money was discovered in bank accounts and random OKX (another centralized crypto exchange) accounts under employees' names, and thousands of private keys were found that were previously unknown.
Frank Chapparo asks if there's a dedicated team assigned to develop this new infrastructure for FTX 2.0 and if it would involve a completely new matching engine.
Loomdart explains his vision for FTX 2.0 while admitting his lack of technical knowledge. He says that it is a massive PR opportunity to recover from a significant failure. He suggests that FTX 2.0 would be an "airdropped" exchange for over a million users who are vested in its success.
Loomdart is unsure who will lead FTX 2.0. The decision largely depends on the structure of the FTX 2.0 restart, which is yet to be determined.
He suggests that external capital may fund the restart, with Tribe Capital showing interest after their meetings with John Ray III.
Loomdart believes the funding for the restart likely won't come from FTX's current assets, to avoid the potential backlash if the new exchange doesn't perform well.
FTX’s lawyers, who aren't crypto-savvy, will likely opt for safer bets rather than risky ventures. Therefore, external investment seems the most likely solution.
He emphasizes the importance of sharing the message that those who had money in FTX are not doomed. There are several ways to recover their funds, such as liquidating assets and launching FTX 2.0.
Blocmates - Sami Explains Dinero, $pxETH & The Redacted Relayer
In this episode of Blocmates, Grant is joined by Sami to discuss decentralized stablecoin Dinero backed by Pirex’s $pxETH and more! Read our notes below to learn more.
Background
Grant (Host) - Founder of Blocmates and Co-founder of Web3nomads
Sami (Guest) - Founder of Redacted Cartel and New Order DAO
Redacted Cartel - DAO building out the Redacted ecosystem
New Order DAO - community-driven incubation DAO that acts as a co-founder to nascent crypto projects by building alongside builders
Redacted Protocol - dApp centered around BTRFLY, which allows users to stake, earn incentives, and interact with governance proposals
Hidden Hand - marketplace for governance incentives (Product by Redacted Cartel)
Pirex - creates liquid wrappers that allow for auto-compounding and the tokenization of future yield/vote events (Product by Redacted Cartel)
LSD - Liquid Staking Derivatives
Impact of Dinero Launch on Sami
Grant asks about the hectic period leading up to the launch of Dinero litepaper and how it's been affecting Sami.
Sami admits that he's become accustomed to the intensity, comparing it to a previous project, Hidden Hand. He reflects that during the Hidden Hand project, there was more urgency due to the fast-paced market and the need to keep up. He then mentions that the Dinero project is more of an upgrade than a necessity, indicating that it doesn't cause him the same stress.
Sami’s thoughts on building in a bear market
Grant asks about the experience of building in a challenging market over the last 12 months, noting recent improvements from Redacted Cartel and widespread activity.
In response, Sami describes the past year as eye-opening. He recognizes that the market was easier in the past and empathizes with the struggles of their partners in the current situation.
Sami observes that many organizations are running low on resources due to overreliance on token incentives. He notes that several entities that launched simultaneously with them have vanished.
Despite the harsh environment, Sami expresses gratitude for their situation. He highlights their careful management of staff numbers and treasury, which has provided them with financial stability.
He explains that Redacted Cartel is in a position where they can continue operating for a few more years, even if everything ceases to function suddenly.
Sami shares that the beneficial aspect of their situation is the ability to remain focused on their work without being overly concerned about the surrounding circumstances, a luxury afforded by their stability.
How long has Redacted Cartel been profitable?
Grant asks about the Redacted Cartel’s focus on profitability and whether that is a consideration from the start.
Sami explains that Redacted Cartel, operating as a DAO is profitable since December 2022, outperforming many other crypto projects. The fees they collect from their treasury and other sources outweigh their expenses. He highlights the team's commitment to innovation without relying on incentives and mentions their projects Hidden Hand and Pirex found a successful niche in the market, helping them maintain profitability.
Sami admits they learn lessons from their initial launch and work hard to incorporate market needs into their decisions. He emphasizes the importance of maintaining relevance in the fast-paced crypto market, referencing Aave as an example of a project that manages to stay relevant.
Grant then asks about their decision to move away from a rebasing model, which he thinks was always the plan. Sami confirmed this and joked about how people don't read the documentation. He also mentions that the crypto markets are agile and one should be quick to adapt.
Sami stresses the importance of keeping their DAO members informed about upgrades and future plans while avoiding the creation of a roadmap, which he jokingly refers to as "scams."
How does the Redacted Cartel decide upon what avenue to pursue next?
Grant asks Sami about how his team at Redacted Protocol decides which new avenues to pursue given the multitude of options that come across their desk daily. He is curious about their decision-making process when it comes to pursuing a new area of focus, especially with their latest venture, Dinero ($DINERO is a permissionless stablecoin backed by user-owned blockspace on Ethereum mainnet).
Sami explains that their thought process has changed since Dinero was launched. In the past, they had several aspects of their DAO that were working well, such as Hidden Hand, Pirex, and the treasury. However, they realized that this was too confusing for the end-user, with these three areas being correlated yet uncorrelated.
Sami also mentions that they could have chosen to double down on one of these three areas, create a fourth option, or create something that lives right in the middle. They decided to create a "glue" for the entire ecosystem, which is what Dinero represents. They believe this approach will attract more participants to the DAO.
Sami states that as a decentralized stablecoin, $DINERO has the potential to pull in more faces to the DAO. It acts as the "glue", connecting the various components of their ecosystem, and making the protocol more understandable for new users. He acknowledges that they were previously overwhelmed with the amount of new projects and trends coming their way.
However, Sami mentions that their new approach is to stick with what works for them and not to get distracted by constantly trying to stay on top of trends. Instead, they're focused on piecing together their existing successful components to create a cohesive and effective system.
High-level overview of Dinero
Grant asks Sami to provide a high-level overview of their project, Dinero, and its goals. He expresses interest in learning more about the protocol underlying the project.
Sami mentions that around a year ago, they (Redacted Cartel) had just launched Hidden Hand and were considering the future of their project. A significant issue they wanted to tackle was the stablecoin problem. They contemplated why there was a need for another stablecoin, considering the emergence of ETH 2.0 and platforms like Lido.
Sami explains that their solution is a three-part module consisting of $DINERO which is their stablecoin, $pxETH which is their Liquid Staked Derivative, and the Redacted Relayer which is similar to RPC like Flashbots. The system starts by building a reserve of $ETH, represented via $pxETH. When the Dinero upgrade happens to $pxETH, there will be native debt tied to $pxETH, allowing users to leverage their staked $ETH positions using Dinero.
Sami notes that stablecoins are generally used for leverage and farming, but to truly succeed, they must overcome the trade-offs they have to make to continue serving their purpose. Many stablecoins reach a point where they are on the brink of success but fail due to these trade-offs.
Sami introduces the role of the Redacted Relayer in their system. When users open a Dinero collateralized debt position (CDP) using their $pxETH, a portion of the $ETH stays liquid. Users can use $DINERO to pay for transactions on any chain or Layer-2, and use $DINERO for gas instead of $ETH. This process includes front-running protection and tokenizes what Flashbots does with Flashbots Protect, offering a stable unit of value that can be used on any chain for transactions.
Sami concludes by saying that they believe this utility will give people a reason to hold another stablecoin, beyond just parking it in platforms like Curve or Balancer for yield.
Sami’s thoughts on scaling decentralized stablecoins
Sami suggests the creation of a decentralized clearing house to arbitrage between protocols, as proposed by a former MakerDAO contributor. The idea involves creating private money markets that interact with public CDPs and protocols. Tapioca could mint $DINERO, while Redacted could mint $USD0 (Tapioca’s cross-chain stablecoin). However, this is a complex topic that he promises to elaborate on in a future paper.
The initial inclusion of $USDC in $DINERO is not for scaling, but to ensure the stablecoin's peg doesn't fluctuate too much in the early stages. There will be USDC Peg Stability Module (PSM) in place to maintain stability until other mechanisms, like the decentralized clearing house, can be introduced.
Sami explains that only the Redacted Cartel will be able to mint the $USDC CDP, while regular users will not have this ability. This decision aims to swiftly reduce reliance on centralized stablecoins like $USDC.
He goes on to explain that the $USDC PSM will be used to mint $DINERO at a 101% collateral ratio (CR), helping to correct any deviations in the peg. When they want to eliminate $USDC reliance, it will be easier because they own all the CDPs.
He also mentions that limiting CDP creation to the protocol itself prevents the scenario where the protocol becomes permanently dependent on a centralized stablecoin, as seen with MakerDAO's reliance on $USDC. This strategy allows the protocol to manage deviations in an automated way and start transitioning out of $USDC when ready.
Sami also suggests that the public can continue to mint $DINERO against $pxETH, taking advantage of yield arbitrage opportunities. The protocol can autonomously correct deviations for the sake of the stablecoin's stability. The eventual introduction of the decentralized clearing house will allow them to close out the $USDC CDPs and withdraw from the use of $USDC.
Grant inquires about the user flow of staking Ethereum ($ETH) on Pirex protocol to receive $pxETH and then minting $DINERO against that. He also asks about the loan-to-value (LTV) ratios and whether they will be as high as 90%.
Sami explains that they haven't enabled $DINERO borrowing yet because they want to observe the demand for $pxETH. He emphasizes that they do not want to be executing liquidations against $pxETH but rather want to take $pxETH into the CDP, allowing it to earn yield, and pay off the CDP itself.
Sami further elaborates that if the health factor of a CDP gets too low, they want to start unstaking $pxETH to get native $ETH. There's a cool-down period for this process, even if there's no queue.
Sami adds that they plan to liquidate people at around 110% CR, which he states is the market standard. He notes that there are two types of liquidations: one of the liquid staking and the other of the CDP itself.
Sami says that for Ethereum an LTV of 110% has proven to work in the market, though it can be changed by governance. The LTV for $pxETH can be variable, depending on the cool-down periods and how long it takes to redeem $pxETH for Ethereum and vice versa.
When asked about the design of their liquidation engine, Sami indicates that they are likely to use a Dutch auction.
Sami’s Thoughts on MEV and Redacted Relayer
Grant asks Sami about his thoughts on Miner Extractable Value (MEV) and how the Redacted Relayer will source its premium flow. He wonders if there will be a lot of lobbying or protocol politics involved and asks how other projects can plug into their relay.
Sami explains their approach in designing the Relayer. He mentions that it wouldn't require a significant effort from other projects to use their relay, as no integration will be needed. He mentions that it's their responsibility as a DAO to encourage others to use it.
Sami also mentions the possibility of creating new projects that would depend on or rely on the Relayer. He emphasizes the importance of ensuring constant availability on indexes and deep liquidity on other chains.
Sami also says that when they enable a utility like this, they want to ensure that projects don't have to completely change the way their protocol works to integrate it. He uses the example of Uniswap, explaining that they should integrate Uniswap, not the other way around.
Sami brings up an interesting perspective about the LSD space, noting how many are focused on maximizing MEV. He mentions $mevETH (Manifold $ETH) as an example of a strategy to capture as much MEV as possible.
Sami then suggests that by approaching from the opposite end of the spectrum, they might find a "blue ocean" of market fit. He explains this could be achieved by offering MEV-proof solutions via Dinero for those using their LSD.
He proposes that the tips paid by users for this MEV-proof user experience across various chains could serve as a unique source of yield and help differentiate their LSD from competitors.
Sami admits that while they have the resources to initiate this approach, they don't have the resources to develop a better MEV strategy than established entities like Manifold. Therefore, they prefer to tackle the issue from this different angle because it is more realistic, innovative, and fulfills a unique need.
Will Dinero go down the block-building route?
Grant asks about Sami's team's intentions toward block building in the landscape and whether they plan to go down that route.
Sami responds that while block building is an end goal, they haven't focused much on it as they recognize the significant amount of capital required to start building blocks. He adds that it's not something they can guarantee will happen within the year.
Grant then asks about the idea of paying for gas with $DINERO, asking if it was influenced by an obscure Ethereum Improvement Proposals (EIP) they were waiting for or if there was something else happening on the backend.
Sami explains that while there are several cool EIPs taking place, they could potentially draft their own. He stresses the importance of validation from the Ethereum community, indicating that the sheer number of proposals about gas abstraction, private mempools, and account abstraction demonstrates product-market fit (PMF).
Grant asks Sami about their approach considering the significant amount of governance tokens they have in the Treasury and their potential strategies regarding Curve, Uniswap V3, Arrakis, and Timeless.
Sami states their goal is to be everywhere and their liquidity strategies are revealed through their integrations with Hidden Hand and Pirex. He mentions the challenge of obtaining Chainlink integrations due to the number of liquidity venues required. He also hints at their plans to be on Uniswap V3 and discusses how Bunni/Timeless is effective for stablecoin and LSDs.
Sami also confirms that they'll also be on Balancer and Velodrome, and mentions their significant holdings and infrastructure that position them well for success in these liquidity venues.
Sami’s thoughts on $CVX Leaderboard
Sami, when asked about the CVX leaderboard, mentions that Redacted Cartel has more $CVX than it shows due to allocations in other projects like Pirex LP.
Sami elaborates on how people may not recognize the actions of different projects on the $CVX leaderboard but believes this will change soon.
Grant queries about the end goal for LSDs and if they aim to be the best LP token, using $pxETH as an example.
Sami says that their goal with $pxETH, stating it's more about enabling $DINERO (their stablecoin) rather than just creating another LSD.
Sami also mentions that solving the stablecoin problem is a bigger priority for them, and they are exploring ways to leverage $pxETH for unique utilities in their stablecoin project.
Sami says that they would support any initiative that aids $DINERO, including pairing on Curve if necessary, but their primary focus remains on making $DINERO more liquid.
Sami acknowledges the competition in the market but reiterates their unique LSD is to facilitate custom solutions for Dinero.
The ultimate goal, according to Sami, is to make $DINERO the best stablecoin in the world, and they are actively working towards it.
How do $BTRFLY holders benefit from Dinero
Grant asks how $BTRFLY (Redacted Cartel token) holders will benefit from all the ongoing developments, such as integration and value proposition.
Sami explains that all fees captured on liquidations, minting, and yields from liquidity will go back to $BTRFLY holders, and there won't be a second token.
Grant inquires about the timeline for the release of Dinero and the next steps.
Sami states that the first release is $pxETH, followed by $DINERO and the relayer. $pxETH will be sent for audit soon and will be released within weeks. $DINERO will be released when $pxETH has enough liquidity.
Sami mentions they are looking for a business development or growth role to help lead Dinero and contribute to the DAO. The role’s responsibilities include coordinating with validators, setting up liquidity venues, and collaborating with ChainLink.