What's Next For Resonate Finance?
Financial NFT Lending | TradFi ETH Price Targets | Saylor on AI & BTC
GM, this is your Daily Bolt briefing.
In this edition, we'll be giving you the latest from Resonate Finance on their financial NFTs and roadmap. We’ve also included insights from Michael Saylor and the reasoning behind VanEck’s institutional price targets for ETH.
If you like the free content in our newsletter, you’ll be glad to know we’ve recently made more of our content accessible to anyone, no account needed. Dive into our Project Breakdowns - comprehensive 60-page + reports complete with all the in-depth insights and details you need to know. If you’re curious about what our platform can offer you, browse through our all-access breakdowns today.
Stay vigilant in the markets.⬇️
1/ Bankless Shows - ETH to $50k by 2030?! VanEck's Bull Case
Preview: In this episode of Bankless Shows, which took place on May 25, 2023, host Ryan is joined by Matthew Sigel and Patrick Bush, VanEck's institutional analysts, who forecast a potential $50,000 price for $ETH by 2030 in their bull case scenario. Click here to listen to the full episode (69 mins).
Read our Note (55 mins) and save 14 mins.
Here are some key takeaways:
Ryan introduces Matthew Siegel and Patrick Bush from VanEck, a leading global investment firm. Matthew, who joined VanEck in 2021, is now the Head of Digital Assets Research leading a team dedicated to crypto research. Patrick, his first hire, is an analyst with a focus on finding profitable crypto tokens and doing financial modeling around crypto assets.
Ryan talks about the report that Matthew and Patrick were responsible for titled "Ethereum Price Prediction: $11.8k by 2030," Ryan is particularly intrigued by their report's audacious claim that $ETH, after its recent hard fork, could be a major competitor to U.S. Treasury Bills (T-bills). He asks Matthew about this bold assertion.
Matthew describes VanEck’s successful pivot to the gold boom in the 1970s when gold was emerging as a legal asset after being banned for three decades. He explains that the same spirit led Jan VanEck, the current head of VanEck and son of the founder, to recognize Bitcoin as a potential competitor to gold in 2017. This led to VanEck investing its profits from gold into Bitcoin, Ethereum, and crypto startups.
Matthew explains that Ethereum and other cryptocurrencies represent a significant shift in the future of finance and considers them the Gordian Knot of finance. He clarifies that their valuation approach is based on the utility of Ethereum, rather than just viewing it as a high beta NASDAQ-type stock. The monetary premium associated with Ethereum changes the valuation multiple of Ethereum, rather than the value accrued from its use case. Matthew implies that this perspective differentiates VanEck from other institutions.
Ryan brings up VanEck's model of Ethereum revenue and price targets that includes predictions for 2030. He states that the current trading price of ETH is approximately $1,900 ($1813 as of May 26, 2023). He also brought up three cases for the price of $ETH by 2030: a base case of $11,849, a bear case of $343, and a bull case of $51K. Ryan explains that these models are based on revenue and cash flows, comparing them to how equities might be modeled. He asks Patrick how the revenue is predicted.
Patrick then explains that a challenge with their model was the potential for substantial ETH burn if there's significant use case execution on Ethereum. In some years, with massive growth in adoption, $ETH might burn 20-30% of its supply, creating uncertainty about how value will be accrued by the blockchain. However, transactions seem to be the best point of value accrual for Ethereum.
Matthew discusses the potential for countries to adopt Ethereum and Bitcoin. He argues that countries rich in intellectual capital might prefer Ethereum, given its smart contract capabilities. However, he suggests that the adoption of Ethereum at the state level might take longer than Bitcoin.
2/ What Bitcoin Did - AI's Impact and Bitcoin's Potential Beyond Money
Preview: In this episode of What Bitcoin Did, Peter McCormack, Danny Knowles, Ben Prentice, and Neil McCormack invite Michael Saylor to discuss the future of AI, the use of Bitcoin for security, the role of miners, and MicroStrategy’s loans. Click here to listen to the full episode (120 mins).
Read our Note (14 mins) and save 106 mins.
Here are some key takeaways:
Saylor says that his first piece of advice is to focus on where one spends their energy. He warns against pursuing too many ideas at once and recommends focusing on one idea. He uses Bitcoin as an example of something he advocates for and focuses on.
Saylor believes that if people take advantage of a new technology or platform within the first five years of its launch, they’ll be remembered for a long time.
Saylor believes that AI can create a digital professor with the knowledge equivalent to a hundred PhDs that will interactively tutor anybody for free.
He thinks that humans tend to become less flexible and adaptable as they grow older, and this makes it harder for them to embrace new ideas and technologies.
Saylor states that technological advancements tend to follow an S-curve. In this pattern, developments are initially slow, then a pivotal breakthrough triggers a period of accelerated advancement.
Saylor says that $BTC is the only network in cyberspace that is secure and runs without human intervention.
He says that to create something that's secure in cyberspace, it needs to be built based on principles that are unchanging, similar to natural laws. He thinks that Bitcoin can be compared to natural law in that sense.
Saylor believes that $BTC has the potential to secure cyberspace beyond just money.
Saylor believes there will be endless generations and evolutions of Bitcoin layer-2 protocols like Lightning Network or its competitors.
Saylor sees scarcity (21 million total supply) as a critical factor for $BTC’s success. He also explains that first-order scarcity of $BTC refers to the 21 million supply limit of $BTC, while second-order scarcity refers to Bitcoin’s transaction bandwidth.
DeFi Dojo - DeFi Dojo AMA w/ Resonate
In this AMA from DeFi Dojo, Stephen is joined by Rob from Revest Finance to discuss Revest’s Resonate Finance, Regen Portal, FNFTs, and more. Read our notes below to learn more.
Background
Stephen TCG (Guest) – “The Calculator Guy“, Founder of DeFi Dojo, CEO of Define Logic Labs
Rob Montgomery - Founder, and CEO of Revest Finance.
Revest Finance - a protocol for locking ERC-20 tokens into ERC-1155 NFTs – the resulting Financial NFTs (FNFTs) representing a new asset class within the crypto ecosystem
Resonate Finance - a DeFi protocol that allows token holders to receive instant payments on future yield by locking their tokens, benefiting traders with guaranteed and consistent yield farming rewards
Introduction to Resonate Finance
Rob defines Resonate as a yield-swapping solution that allows users to get an instantaneous fixed rate on nearly any crypto asset, using an order book for vertical scaling and financial NFTs as financial instruments that last for any duration.
Stephen asks if users can lock up yield-bearing tokens and rent them to others for upfront payment or rent someone else's yield while paying a renter fee.
Rob confirms this and adds that the renter fee is paid upfront in whichever asset the user prefers, allowing for hedging against price changes.
Rob is excited about a new vertical that promises a stronger product-market fit. He explains their ongoing work with institutional funds, specifically with Digital Opportunities Group and Velodrome.
Rob mentions Resonate's appeal to prime brokers and banks due to its ability to offer fixed rates to retail or banks without in-depth knowledge of crypto and compares Resonate to Celsius but with greater transparency. Rob also mentions that Resonate mainly deals with $ETH and $GLP.
Resonate's Innovative Products & Partnerships in DeFi & FNFT Lending
Rob suggests that new Resonate users should start by understanding why fixed rates are a good thing.
Rob elaborates on their product, "Regen," which he believes helps users understand why they would take a lower return on an interest rate - because they can do other things with the money.
Stephen confirms his understanding of Regen as providing a leveraged return yield for no risk on the principal.
Rob provides an example of their product, where users lock up $GLP for a week. Regen gives users the option to choose leverage and either long or short $ETH.
Rob highlights that the user isn't risking their principal sum, but is leveraging the upfront payment of the yield on the principal instead. He adds that even if the user gets liquidated, they only lose the yield, not their principal.
Rob adds that leverage positions can be opened on both GMX and MUX.
Rob mentions that they are building a network of partners to support FNFT lending, including Dolomite and other parties in the NFT Finance sector.
Rob talks about Resonate’s Fixed-Return pools where users can receive a fixed-rate upfront, then get a loan on their FNFT for less than its value in a week's time. This loan can be reinvested to get more fixed rates and FNFTs. Rob gives an example: the receiver locks up their $GLP and receives a fixed rate which is represented by an NFT position. The NFT can be used to reclaim the $GLP after the expiry period.
Liquid Staking Derivatives War and Sticky Liquidity
Rob talks about the ongoing war for liquidity on Liquid Staking Derivatives (LSDs) and highlights Frax’s success with their vaults paying a slightly higher return for those willing to lock their assets for a set time period. He mentions that this model relies on Convex, which only operates on the Ethereum mainnet, and can cause high transaction fees.
Stephen mentions other mechanisms for encouraging sticky liquidity, such as the ByteMasons' Reliquary mechanism, which could lead to better yield over time for holding long-term, and financialized NFTs.
Rob differentiates their mechanism from Byte Mason’s Reliquary model by stating that with Resonate, it's impossible to withdraw the LP tokens during the lockup period and it prevents panic selling. In times of fear, people will always choose safety, even at a financial loss.
Role of ERC-4626 Tokenized Vault Standard
Rob mentions that Frax could potentially host one of Resonate’s pools and choose their paid-out asset. They could have pay-out in $FXS if they wanted.
Stephen asks if Frax could incentivize an LP token on Resonate. Rob explains that Frax would have to decide where the incentive is going to go, like Chronos or Velodrome, as Frax has to choose which DEXs and auto-compounders to use.
Stephen asks why an auto compounder would be necessary, and Rob explains that Resonate’s system only pays out rewards in a single asset. Rob mentions that they have adopted ERC-4626, the new yield vault standard, and that they contributed to making Beefy, Reaper, and Yearn backward compatible with ERC-4626.
Rob mentions that ERC-4626 makes onboarding a yield farming protocol instantaneous. He gives the example of Rage Trade using an ERC-4626 vault and that onboarding to Resonate was simple for Rage Trade.
Stephen asks about assets like sGLP, wstETH, or sfrxETH, which gain value intrinsically, and how they could be used on Resonate's platform. Rob confirms that these types of assets can be used, explaining that the ERC-4626 system can track how much they increase in value.
Resonate Roadmap
Rob mentions that they're working on a user interface for a more straightforward LSD for retail users. He talks about building an FNFT marketplace and FNFT lending.
Rob mentions that they are also focusing on the front-end rebuild of their platform for better user experience, for which they are hiring a UI/UX designer. He talks about Resonate V2, which will offer leverage and facilitate the creation of more structured DeFi products.
Rob explains that notional leverage enables more potential returns on a smaller amount of invested capital but also includes a risk of liquidation. Resonate V2 will allow for leveraging the interest rate.
Rob mentions that liquidation risk occurs when the interest rate drops below a certain point.
Rob explains why Pendle's system may struggle to integrate leveraging interest rates due to its one-to-one structure and AMM.
Rob believes Resonate will be the one to build the first robust FNFT marketplace and highlights the importance of developing a standard to value FNFTs. He adds that Resonate will contribute an EIP that dictates how to value FNFTs and develop a marketplace based on it.
Q&A
Q: How does the $sGLP example payout 1.1% per week, which is 57% annualized, if $GLP is only generating 27% APR?
Rob explains that they use a similar approach to Flash Stake, which managed to pay out 65% when they started even though they were initially losing money.
Rob mentions that the initial high payout rate is a way to incentivize people to use the system and attract users to Resonate’s, Regen. This strategy was successful in bringing in several hundred users and generating a decent volume in the first week, although the numbers have been gradually declining since then.
Q: Why wouldn’t Resonate use a DCF (Discounted Cash Flow) model to value FNFTs?
Rob mentions that in terms of valuing FNFTs using a DCF model, it might not be suitable due to the nature of FNFTs and their limited liquidity in a niche market.
Instead, he suggested letting the market determine the value of FNFTs through order books, similar to how most NFT marketplaces currently operate.