DeFi
DeFi Dynamics. Exploring the Future of Finance.
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Some thoughts on Robinhood: I think the frustration from defi users that Robinhood isn't crypto enough is unwarranted. 1. They are a stock trading business who identified a key business area that blockchains help with: trading execution. Using a single engine to generate user state instead of rolling and maintaining their own is a huge win, even if its extremely limited. 2. I remember Perp Protocol doing the same thing with Optimism and Uniswap. They had a controlled ERC20 that only interacted with Uniswap, with a single contract owner. It was hyper efficient. 3. It legitimizes the space. There are a number of key trading systems that would see a huge step function in efficiency if they just used a blockchain backend. Seeing Robinhood do this first might not be interesting for us, but its sending out more signal that crypto will improve your operations. I know everyone wants anarco-capitalism, but Rome wasn't built in a day!
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Spending some time revisiting the LVR paper, and it does provide a nice framework for hedging concentrated liquidity positions and valuing performance of an LP position. My only issue is, for the majority of crypto users, I don't think they should hedge their positions or use LVR! The paper does discuss this in the Loss-Versus-Benchmark section, I just think the benchmark should be the dollar amount in all of the non-USD token. People should be using Uniswap range orders when they want to go long a token without hedging. - If you want to buy $1000 of a token spot, make a range order with an appropriate range depending on the volatility. 15-25% on both sides of the current price could be an option. - If the position moves up and out of range, you made some money in fees and would be selling as the token moves up. - If the position moves down and out of range, you lost some money, but you lost less than you would have holding the $1000 spot. https://arxiv.org/abs/2208.06046
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