Dose of DeFi

Deep dives in the emails

Hot takes in the Tweets

[Dose of DeFi @doseofdefi]

https://t.co/wbMh4uY1p8

[𝕯𝖆𝖓𝖌𝖊𝖗 @safetyth1rd]

@ImperiumPaper @andrewhong5297 It’s absolutely insane aave is still sitting around waiting for other parties to resolve before acting to save their own protocol.

[monetsupply.eth @MonetSupply]

rates on @aave have risen quite a bit in the past week, making LST loops unprofitable and stablecoin borrows significantly more costly

thankfully, the chads at @DeFiSaver have made migrating positions to alternative lending protocols like @sparkdotfi SparkLend easy

here's how->

[Getty Hill @getty_hill]

Revised 4/21

The path forward is still generally what I've outlined in the prior tweet...

"Aave" liquidates/takes over the positions with bad debt with loaned funds so they can get the protocol operational again.

KelpDAO should work towards winding down the protocol and distributing the proceeds back to token holders, since they don't have enough equity to fill the hole.

The good news and bad news.

The good news is that Arbitrum recovered $71M (26% of the losses). Instead of rsETH holders getting cut down by 18.5% its closer to 13.6%.

The bad news is that my prior post didn't account for the pre-existing Aave loans that are now underwater after factoring in the 13.6% loss.

It looks like there is ~$153M of bad debt on Aave (accounting for rsETH at trading at the 13.6% loss)

Although that sounds like a lot, Aave has a $1.4B market mcap, and lots of investor interest as the RWA thesis grows in popularity. They can raise money by selling $AAVE to investors.

Everything is going to be fine. DeFi isn't going anywhere.

https://t.co/QboPGpJZOa

[Dose of DeFi @doseofdefi]

@Lomashuk @hosseeb just that everyone then realized the massive risk with looping.

That was the first time, so felt especially scary

[Dose of DeFi @doseofdefi]

@hasufl Would the EVM be as dominant as it is today if the rollup-centric roadmap was not followed?

[Dose of DeFi @doseofdefi]

A good day to watch this movie...

[Dose of DeFi @doseofdefi]

"we expect the Aavethena loop to essentially fully unwind in the coming days, which could result in roughly ~1.4 billion reduction in USDe circulating supply (~25% reduction)"

[monetsupply.eth @MonetSupply]

aave was a fairly central part of the defi ecosystem, so there are various secondary impacts to other protocols from the current crisis

one of the largest is probably Ethena USDe, via the Aavethena partnership

in practice how this has worked is:
1) Aave lists Ethena USDe and sUSDe as collateral within various markets (currently Ethereum Core, Plasma, Mantle, and Ink)
2) Ethena deposits their stablecoin reserve USDC and/or USDT backing into Aave, boosting Aave market size
3) Loopers deposit sUSDe, USDe, and/or Ethena PTs, and borrow out USDC/USDT to lever up on Ethena yields often with Ethena paying additional incentives ("liquid leverage") which boosts Ethena circulating supply

Ethena is now mostly out of Aave deposits (notable exceptions of Mantle where Ethena has $268 million stuck and potentially subject to a partial haircut, along with $140 million USDtb deposit in Aave Core which Ethena is inexplicably not withdrawing despite the risk of capital impairment)

with stablecoin markets at full utilization across the 4 markets, loopers are now at significant negative ROI (potentially -50% APY or more). in practice, this means we expect the Aavethena loop to essentially fully unwind in the coming days, which could result in roughly ~1.4 billion reduction in USDe circulating supply (~25% reduction)

more fundamentally, this situation puts certain business practices of leveraging risk management decisions as part of strategic partnerships in a negative light

is it appropriate to allocate user funds at below the risk-free rate to secure collateral listings? or on the other side to give commercial considerations precedence over risk management during the collateral onboarding process? my opinion is NO, curators should be putting their users first

[Yuki is short, so is life @ballsyalchemist]

https://t.co/Zy2QqXOEqD

[Kilgore @0xKilgore]

Thoughts on the "DAOs are dead" meme at @doseofdefi

[Dose of DeFi @doseofdefi]

https://t.co/fq0XeuTyMa

[Kilgore @0xKilgore]

The Aave DAO/Labs fight is reminding me of a piece I wrote on DAO sovereignty and why it's important, (gulp) four years ago.

It holds up pretty well!

[Powerhouse @PowerhouseDAO]

Open source built the stack, but Big Tech owns the rails and captures the revenue.

At the Open Source Hub at Devconnect ARG, @0xKilgore from @PowerhouseDAO shares a model for open-source revenue and network orgs so communities can fund infra and fight Big Tech.

Full video 👇

[Dose of DeFi @doseofdefi]

@JasonFairhurst2 @snapcrackle I don’t get why you won’t have low rates for tokenized stocks like you have low rates for BTC/ETH/all crypto

The beauty of being on chain and in liquidity pools is that the collateral is liquid. That’s the whole point.

Banks can’t price liquidity that you can only get on chain

[Dose of DeFi @doseofdefi]

@JasonFairhurst2 @snapcrackle bc ofc you can pretty easily automate margin call protection (as @DeFiSaver does) so you could always make sure the loan is above water by selling collateral before the margin call.

[Dose of DeFi @doseofdefi]

@JasonFairhurst2 @snapcrackle Borrow rates from DeFi are much much lower than what non-billionaires can get. I dont see why that market wont expand to tokenized stocks?

And then everyone can borrow at single digit rates with low volatility collateral.

It automates the margin call but why is that so bad?

[Will Sheehan @wilburforce_]

Clever setup here to use the forking as a cleansing mechanism instead of intended use as an oracle.

Augur is the protocol that crypto pilled me and disputes were some of my first crypto txs

This has a very low chance of success, but here for the retro futurism

[Dose of DeFi @doseofdefi]

@RebeccaRettig1 @m_mosier_ @AnnSoCloots I don’t think it’s as black and white as you say.

Is USDC permissionless? Could DeFi lending work without dollar liquidity that isn’t? What about a hook that blocks certain addresses from trading with a pool?

wrote about DeFi splitting in two a year ago
https://t.co/MlXEUfHTBS

[Dose of DeFi @doseofdefi]

@RebeccaRettig1 @m_mosier_ @AnnSoCloots I don’t think it’s as black and white as you say.

Is USDC permissionless? Could DeFi lending work without dollar liquidity that isn’t? What about a hook that blocks certain addresses from trading with a pool?

wrote about DeFi splitting in two a year ago
https://t.co/MlXEUfHTBS

[Dose of DeFi @doseofdefi]

DeFi: the focal point of the market structure legislation discussion

https://t.co/cTMl1PgJRF

[Dose of DeFi @doseofdefi]

But what do Senate Democrats think of Internet Capital Markets?

[Dose of DeFi @doseofdefi]

DeFi Meme watch 2025:

Great to see Larry Fink say "decentralized finance is an extraordinary innovation" in his annual letter.

What phrases TradFi will use as they go onchain:
- Tokenization: clearly a core meme already that will probably swallow "RWAs"
- Blockchain: yes, still fond memories of "bitcoin not blockchain"
- Crypto: No, we're trying to be respectable

Hence why DeFi/decentralized finance is still the meme that's needed to cross the chasm and describe the new onchain financial industry as a whole.

an you imagine Larry Fink saying "internet finance"?

I can't.

[Dose of DeFi @doseofdefi]

Prediction markets are the third use crypto use case after censorship-resistant money and stablecoins and also just one part of the DeFi meme

https://t.co/3RQlmTBUEz

[Shayne Coplan 🦅 @shayne_coplan]

Markets on everything.

We’re proud to announce that $ICE, the owner of @NYSE and the largest exchange company in the world, is making a strategic investment of $2 billion into Polymarket, valuing us at $9 billion post-money.

Our partnership with ICE marks a major step in bringing prediction markets into the financial mainstream. But in addition to that, it’s a monumental step forward for DeFi. ICE is the one remaining founder-led exchange company, and Jeff is all-in on utilizing his assets, including NYSE, to usher in a new financial era of tokenization. We’re humbled to be working together on this endeavor. ICE will also begin distributing Polymarket data to thousands of financial institutions around the world. There is so much to build when you combine the force of ICE’s institutional scale and credibility with Polymarket’s consumer + cultural savvy and distribution.

The past two years have been surreal. Going from a write off to creating a category, watching our vision become a reality. The Polymarket origin story is funny because it's a rare case of the dream being identical to how things played out. If I learned one thing, it’s that bold ideas are everywhere, hidden in plain sight. It just takes someone crazy enough to spend their life willing it into existence. That’s entrepreneurship: willing things into existence.

I remember reading Robin Hanson’s literature on prediction markets and thinking - man, this is too good of an idea to just exist in whitepapers. There were a million reasons why it shouldn’t work, countless arguments of why not to do it, and the odds were against us, but we had to try.

At the onset of the pandemic, I quite literally had nothing to lose: 21, running out of money, 2.5 years since I dropped out and nothing to show for it. But I knew we were entering an era where ways to find truth would matter more than ever, and Polymarket could play a critical role in that. After all, nothing is more valuable than the truth. It’s still a work in progress, but we’re honored to have made the impact we have thus far.

I’d also like to give a special thank you to all of our users, builders, and community members who have been with us since 2020. Your support will not be forgotten 🔮

Last but not least, I am deeply grateful for all of the support and hard work of my brilliant team. I’m getting to live my wildest dreams, seemingly against all odds, and I don’t take it for granted.

The best is yet to come… 🇺🇸

Que Sera Sera

[Dose of DeFi @doseofdefi]

But what do Senate Democrats think of Internet Capital Markets?

[Brendan Pedersen @BrendanPedersen]

News: Senate Democrats sent Republicans their first legislative offer this week for market structure.

Democrats offered provisions on decentralized finance on Wednesday, the thorniest policy area. The two sides are far apart, but it's a starting offer.

PBN texts has the doc >>>