Manu

DefiChain

[Emilia @semilia1207]

Reingeschaut #GERCUR

[Manu @the_manuel]

@BLorilora @ratoshi21 @HasenbauKonzept @thebitcoinboat @LnAmbassador @ge3onim0 @nicolen8wak Aha. Sehr qualifiziert. Schade.

[Manu @the_manuel]

@mkuegi @defichain Doesn't mean that things would have gone better on DMC. Only project that left DMC and still is running (although struggling as well) is javsphere, right? Javsphere was the one you advised/partnered, right?

[jellyverse @jlyvrs]

Jellyverse Socials & Frontend Sunset Announcement

After careful consideration, Jelly Labs has made the difficult decision to wind down its operation of the Jellyverse Frontend and other contributions to the Jellyverse ecosystem. 🧵👇

[Kügi @mkuegi]

Reflecting on @apollon_fi: Observations from the chain and the current state of the system.

Disclaimer: I have no connection to the team and never used the system itself (but I tried to support it by stabilizing their stablecoin). I was very skeptical about the tokenomics from the start and do not have a good history with the team (to say it mildly). But I believe there are good learnings everywhere. Despite all the beef, there is a lot to learn here. Everything stated here is based on public information (onchain and Dune dashboard) and my assumptions. I am likely wrong in many cases, feel free to correct me.

Background
Apollon is a Liquity fork that aims to provide decentralized #RWAs. The stablecoin ($aUSD) can be redeemed, while the RWAs depend on dynamic fees (on their own DEX) to stay close to the oracle price. I didn't follow the protocol at the beginning (after they left @defichain), but AFAIU they had a version 1 which somehow failed, and then launched version 2.

About the Tokenomics
Dynamic fees sound interesting, but reality shows the incentive was far too weak. Decentralized minters did not support the project and we saw premiums regularly touch the hardcap of 10% (which potentially leads to lots of bad debt). My original critique on the tokenomics was "likely gets into big trouble if there is strong demand". It seems that there was never that strong demand, so we don't know if that would have been a problem.

Why relying on the 110% hardcap from vaults is risky: As soon as a token goes above 10% premium, people put in $110 collateral, mint $100 in tokens, and sell for $110. The vault is essentially abandoned. If collateral drops or the token oracle rises, it gets liquidated. Not a problem in itself, but if the token is still at a 10% premium at liquidation, the process is negative sum (because collateral is worth $110 but the token-loan is also >=$110). Mixing price stability with collateralization is a ticking timebomb.

The First Yellow Flag: Collateralization with Slow-Redeemable Token
Based on the tokenomics, I was skeptical, but there were no immediate red flags. This could have been a reasonable approach. But they used their own token, $GEM, to collateralize their initial liquidity.

The problem arises when $aUSD gets redeemed for $GEM and there is not enough immediate redemption balance for $GEM. Then the full redemption process for $aUSD gets stuck, which dissolves trust and increases discount risk. At the beginning, $1.3M of the $1.4M collateral in the system was $GEM, backing $540k in loan tokens. Likely hoping/thinking that it would never get redeemed.

The Red Flag: Collateralization with Own, Illiquid Token
The system didn't really take off. Very low volume and liquidity indicated very low interest. But no blame there; it's hard to get attention, specially in this area of #DeFi and with this history.
However, they then decided to launch their own coin $APO and introduced a big red flag: they added $3.7M in $APO as collateral to increase liquidity. Later on they increased this to $14.7m in $APO as collateral.

Valuing an illiquid altcoin at market price in a low-liquidity DEX pool is a major risk. But it didn't stop the loans in the system from hitting $1M, backed by $1.3M in $GEM, $70k in reasonable collateral (SEI, wETH, USDC, wBTC), and their own tokens.

The Final Decline: Timeline of the last month
- Dec 8th: Someone redeems a strong amount of $aUSD yielding 390 $GEM (~$4700). Gemswap doesn't have enough balance, so $GEM goes into the PendingManager where it is still waiting.
- Dec 16th: 80% of pool liquidity within the system is removed. Volume drops to 0. (Was the previous volume organic?)
- Dec 18th – Dec 23rd: Majority of $GEM is removed from collateral.
- Before Dec 22nd: Majority of liquidity is removed from the $APO-$USDC pool, leaving only ~$350 USDC in the pool.
- Dec 22nd: $aUSD redemptions return $APO. Some of that $APO (less than $20) hits the DEX, dropping the price by 23%.
- Since then: $aUSD redemptions fail completely (Errors: "NoRedem", "OracleUntrusted", "reverted without error").

Yesterday: Someone sold another $86 worth of $APO (not from redemption, maybe from staking rewards?), sending it down another 43%.

Status Quo (or 3 days ago cause dune dashbaord doesn't even provide data, cause it is not taking it from chain but from their own server which is no longer responding?)
- Only $4.3k in reasonable collateral (SEI, wETH, wBTC, USDC) remaining.
- $340k $GEM in collateral remaining.
- $APO in collateral was valued at $8.9M three days ago, but the main pool has only 220 USDC left.

- 360k in loan tokens still open.

In the current state, they actually reinvented the LUNA death spiral: $aUSD redemption doesn't directly mint $APO, but they use pre-minted $APO which is now being returned for redeeming $aUSD. Any redemption would immediately crash $APO to 0. This destroys any trust in $aUSD.

It's hard to see it any other way than that the system is bankrupt.
But not beyond saving: If $APO is removed from collateral and replaced with at least $56k of real collateral, the system itself would be back in a somewhat healthy place. If the $GEM is also replaced with liquid collateral, the system can be considered fully healthy again.
But with redemptions failing for over a week and $GEM redemption pending for weeks. it's more likely the project is at a standstill.

Lessons for other decentralized #RWA systems (@basedRWA take note!):
- Don't be afraid of slow starts. Better to have low volume/liquidity than to mess up a protocol just for "fancy" numbers at the beginning. (also a lesson we learned the hardway from @defichain)
- NEVER use anything but major coins as collateral. The liquidity of your collateral decides between life and death.
- NEVER mix your own coin's price with protocol health. This creates an impossible conflict of interest: save the coin or save the system?
- Transparency in Crisis. Cryptic errors like "OracleUntrusted" or "NoRedem" (or even worse: "rejected" with no reason) are the death knell of trust. Redemptions must be predictable, or the market will assume the worst.

I hope anyone who believed in this system (and specially their token) did not lose more than they could afford. And best case I am wrong, and its just a slow down. Real collateral is coming soon and everything will be back to normal? Unfortunately their social media is also silent for months now.

And I hope that @gldswn will provide redemption funds for $GEM so that the waiting redemptions can finally be paid out. Specially with their new platform coming out soon.

#DeFi #RWA #Stablecoins

[Manu @the_manuel]

@BTC__Bacon @fabioandreatta Yep, it's a fallen world.

[Manu @the_manuel]

@FitFounder WALK

[dex-trading.live @DexTradingLive]

We say thank you to the community for this trust!

Today the ownership of the Lightwallet was shifted to us, which means that the threat of unlisting the Lightwallet from the app store is now gone🥳

We are one community and we arr holding together! 🤝

A big thank you to defichain labs for the smooth transition even after some communication issues 😇

#TradeSmartNotHard #defichain @defichain

[Manu @the_manuel]

@BTC__Bacon @pain I feel you, Bro.

[Manu @the_manuel]

@KingPepeVI @Plutus_Support

[Manu @the_manuel]

@DDhopn @Plutus_Support I successfully upgraded my reward level on 14th February but still no PLU payout possible. See ticket #342389

[Manu @the_manuel]

The OGs fixed it!

[DeFiChain @defichain]

🚀 LightWallet for Android is Back Online! 🎉

The DNS issue affecting the Android version of LightWallet has been resolved, and the app is now running smoothly again.

A huge thank you to @bushstar & Andy from @mydefichain for their efforts in getting this sorted! 🙌💙

[Manu @the_manuel]

@mkuegi Come on over to @defichain. Price doesn't matter anymore. We're here for the tech. Hm, can't remember where I read that... Just use a new twitter handle.

[Manu @the_manuel]

@DeFiChainLabs @lars_8008 May I quote you "Ensure seamless and uninterrupted user experience" don't know what could be more end user related than the LW.

[Manu @the_manuel]

@DexTradingLive Shouldn't the high NI already be active? https://t.co/ZkiqxlfYIA

[Manu @the_manuel]

@ralfpassing @Javsphere Muss man aktiv werden als JAV holder auf der DMC? Link?

[Manu @the_manuel]

@mkuegi why does the dUSD /dUSDC pool have 0% commission?

[Manu @the_manuel]

@fabioandreatta Unter der Woche gibt's bei unseren 3 (6,8,11) kaum Zeit für Screentime. Am WE kann es in ner Mittagspause schonmal sein, dass was angeschaut wird wenn wir nicht unterwegs sind. Eigene Devices gibt's nicht, nur ein Family Tablet. Der große wünscht sich jetzt ne Konsole🫣 Tipps?

[Manu @the_manuel]

@fabioandreatta So spät wie möglich aber bis 3 Jahre absolut Bildschirmfrei, 3-6 max. 30min,6-9 30-45min.