GMX AUM Grows, Opensea on SOL, Designs for Liquidation Mechanisms

Chart of The Day: GMX’s AUM Grows

• GMX is a spot and perpetuals exchange on Arbitrum and Avalanche. GLP is a basket of blue-chip assets, consisting of BTC, ETH, AVAX, and stablecoins. GMX utilizes GLP for spot swaps and levered trading, providing the best on-chain execution for both Arbitrum and Avalanche. This is thanks to GMX’s oracle pricing model that prices trades as if users were using a CEX.

• GLP is able to generate extremely attractive natural yields due to its high utilization and dual-purpose use of capital. The attractive yields grew GLP’s liquidity, expanding from $103M in AUM to $340M in AUM, a significant 228% gain from the start of 2022.

• GMX’s GLP pool continues to attract liquidity given its high yield of 33% paid in ETH + an additional 19% of esGMX on Arbitrum + 20% paid in AVAX + an additional 24% of esGMX. (esGMX = GMX that is vested over 1 year as long as you hold the underlying GLP position).

• One of the reasons GLP is able to provide such high natural yields is because it acts as the counterparty to all leveraged trading positions on the platform. This means as traders profit GLP will have to pay out, but if traders are unprofitable GLP accrues even more value on top of fees. Since leveraged trading is quite hard, GLP pools have made an additional ~$10M on Arbitrum and ~$1M on Avalanche.

• To learn more about GMX, read our Delphi Pro report here.

Akutars, Moonbirds & Anata, Coinbase’s BAYC Casting Call

[Excerpt from Apr. 13th NFT Insights]

• OpenSea finally launched its beta Solana marketplace on Apr 7 with an interface that is very familiar to most NFT traders. During the beta launch, OS stated that there will be limited collection coverage. The full launch will include a scalable way to expand coverage via the Metaplex collection standard. So far, Solana transaction volumes on OS have been relatively tiny with Magic Eden continuing to dominate on Solana. Will that change in the future once OS fully launches? We shall see.

Weekly Highlight — AMA (Aku World, Moonbirds, Anata)

Anata is an interesting experiment in pseudonymous identity. Today PFPs are mostly static images used by individuals to represent their digital identities on social media and messaging apps like Twitter, Telegram, and Discord. Anata extends this beyond just images: your Anata PFPs are live and use your camera to mimic your movements.

• Unlike most NFT projects that present a roadmap of future development, here there is a fully working product at launch. You’ll be able to use your Anata immediately on video calls.
• I had a look at the demo: the anime art looks well-drawn and detailed. You can set reactions too, like fire eyes or angry eyes. However, when speaking, the mouth movements don’t exactly match up to the voice which can be a little jarring.
• Each NFT is crafted individually and is a 1/1, allowing you to stand out from other owners.
• Part of the mint funds will go into a community-directed treasury that can be used to do cool stuff that the community votes for: make new art, 3D models etc.
• The team is not doxxed, but includes well-known pseudo-anonymous folks like DCFgod and Big D.
• Mint date is on 21 Apr and will be conducted via. 24-hour auction on Metadrop. Submit your bid for the max amount you’re willing to pay (min 0.25E) during that time period. At the auction end, every winning bidder will pay the same price. The auction will end randomly during the last 2 hours.
• For more, Delphi members can see the latest NFT Insights here.

Breaking Down the Design Space of Money Market Liquidations

[Excerpt from Apr. 13th Delphi Pro report]

What makes for a good liquidation mechanism?

• Avoiding the occurrence of bad debts is the primary aim of a liquidation design, as unliquidatable collateral is a loss typically borne by the protocol or socialized among token holders/depositors. Other considerations such as improving the access of liquidation surpluses and tempering the severity of penalties may also alleviate an otherwise unfortunate experience. We believe that a good design should refrain from crippling borrowers with overly harsh liquidation penalties, minimize the cost of carrying out a liquidation, and ensure that there is sufficient liquidity to unwind these positions – especially during torrid market conditions.
• Taking these considerations into account, we created a framework to evaluate various liquidation mechanisms. The key factors can be distilled as follows:
  • Democratization of liquidation profits is defined as the access to, and competition for, liquidations and their resulting profits. Liquidations on Ethereum are typically dominated by keeper bots that compete to liquidate discounted collateral.
  • Speed of liquidations can be measured by how quickly the protocol is able to get rid of underwater positions via liquidation.
  • Transaction costs refers to the cost borne by liquidators for liquidating collateral.
  • Capital efficiency refers to borrowing power, measured by the LTV ratio. A higher LTV indicates better capital efficiency, and lower LTV indicates lower capital efficiency. The main reason for including this was to ascertain whether protocols were limiting capital efficiency to make room for more effective liquidations.
  • Price impact refers to the impact of liquidations on the price of an asset. Several liquidation designs have internal sources of liquidity or other levers such as limits and delays to minimize price impact on exchanges.
  • Liquidation penalty is defined as the penalty a borrower incurs as a result of liquidation. An optimal penalty for borrowers is one that is just enough to incentivize liquidators but without leading to cascading liquidations.

• We believe that liquidation processes should be influential in determining which money market to use, among other considerations. An optimal process could mean more lenient liquidation penalties for borrowers, or a lower risk of socialized bad debt for lenders and token holders should the unexpected happen.
• Liquidation mechanisms have largely existed in DeFi as an insignificant feature of money markets. Often overlooked are the variations that have emerged and improvements that have taken place over the last few years. It’s during periods of market volatility where these liquidation mechanisms take center stage and prove their merit.

• For more, Delphi members can read the full Delphi Pro report here.

Notable Tweets

Elon Musk Offers to Buyout Twitter

Billionaire Elon Musk offers to buy Twitter for $41.39 billion, a regulatory filing shows

—Reuters (@Reuters) April 14, 2022

Ava Labs Raises $350M at $5B Valuation

Ava Labs, the lead developer of the Avalanche blockchain, is raising new funds that could make it one of world’s the most highly valued crypto startups.
https://t.co/lx1hk9sVdE

—Bloomberg Markets (@markets) April 14, 2022

Thread on Nebula’s Launch

1/14 Have staked Luna?

You’re getting a
@Nebula_Protocol
airdrop on Friday!

How much will I get? What is Nebula anyway? When can I buy and sell $NEB? What exactly is a liquidity bootstrapping pool?

To learn about the Nebula launch, read on…

— Terra Watcher (@lurkaroundfind) April 14, 2022