It’s a dangerous game being a main character in crypto. One that inflates egos, infuriates communities, and puts a large target on your chest. We’ve seen this play out during almost every crypto cycle: a new player enters the game, finds wealth and power in the industry, grows overconfident, then sees their legs cut out from under them.

Mark Karpelès (CEO of Mt. Gox): Eviscerated in a liquidity crunch due to theft.

Arthur Hayes: Brought to the principal’s office and introduced to the long arm of Uncle Sam.

Su Zhu and Kyle Davies: Inflated egos flew them too close to the sun.

Do Kwon: Deployed too much capital.

Sam Bankman-Fried: Whacked like a mole.

Barry Silbert: He was the yield.

CZ: Stalemated himself playing 4D chess.

The list is long, and I could go on, but the message is clear. In crypto, we love when people climb to the top of the industry. We love a king of the mountain almost as much as we love to see them fall into disgrace. How long before Brian Armstrong has to take a loss? Personally, I hope his bald head can find a way to survive.

This brings us home, to Polkadot. A disorganised, pink mess trying to connect the dots and build an interoperable future. I’ve been active on Polkadot for many years now, and we also have had some great main character arcs. Beloved community members like Gavin Wood, Jay from the Kusamarian, and DonnieBigBags all seem to have had their shining moments in the sun and lived to tell the tale. So it’s easy to survive on Polkadot then?

Sadly, no. This is crypto, and the only thing that is certain in this game is pain. We’ve seen players like the Multichain bridge, aUSD, Peter Ruchatz (ex-CMO of Parity), and KryptosChain all be forced to write red ink, eat pain, and toss the towel in. Make no mistake, the stakes are high, crypto is hard, it won’t get any easier, and there are no do-overs.

So why would anyone want to play this political high-stakes game, think of the risks! This brings us to OpenGov; if you don’t know what that is, I will leave a link below for you to read up. In short, OpenGov is a governance system that allows DOT token holders to control the direction of the network and deploy treasury funds. This control is expressed via on-chain voting; the more DOT you have, the greater your vote. We’ve already completed some really exciting votes for our new Polkadot race car, Dotcodeschool, Bagpipes, a decentralised marketing initiative, chopsticks, and even some live events! There has, of course, been a lot of drama, hurt feelings, and debate.

![](https://miro.medium.com/v2/resize:fit:640/0*uSVQgmM3nvihL8ca.jpg)

This brings us to who I would propose is now the new main character of Polkadot: Giotto, also known as 16DGiP6jDwAfkAeqGfkUCtheKgUzTy7UeaiFFBAv8BwX3RhN. He’s a relatively new player in our game but has already had a seismic impact on the ecosystem. Known for having a large voting power, actively participating in governance, and being extremely proactive in organising the community. He wields a very large number of tokens and he alone can decide the outcomes on most OpenGov proposals. His vote is so large that unless other players enter the game, he is the captain now.

![](https://miro.medium.com/v2/resize:fit:500/1*G1xbRWcz_OHhkkzrHM2jfg.png)

Let’s take a look at some of the feathers he’s rustled, actions he’s taken, and initiatives he has put his weight behind:

* Expert collective.
* Marketing bounty.
* Decentralised business development organization.
* Introduction of memecoins.
* Koala DAO.
* Helped secure marketing deals such as Altcoin Daily, Lark Davis, Mario Nawfal, etc.
* DeFi incentives group.

Giotto holds regular open spaces where community members can come on stage and debate their perspective in an open format, the arena of ideas, something I love. Alas, it ain’t all sunshine and rainbows. Like any good main character, the man has an ability to generate conflict with others in the community. I won’t go into graphic detail, but on multiple occasions, he has gone toe-to-toe in public with other actors in the ecosystem. Some may call this unprofessional, salacious, or even antagonistic. Personally, I call it entertaining. We should all understand that when we enter the arena of ideas, willing to throw blows, we must also be willing to accept them in return. Polkadot is no different.

My Personal Opinion:

I’ve been building and working in the ecosystem for some time now, and during the BG era (Before Giotto), I had the same experience countless times. Organise a big set of regular calls, all share their opinion, everyone disagrees, everyone thinks they are right and everyone else is wrong. Leading to little to no action being taken.

I cannot stress this enough; I’ve seen hundreds of triggers that should have been pulled, deals that should have closed, delays that could have been avoided all because of one simple fact: everyone in the ecosystem has an opinion that they think is best. Human nature leads us to think person A’s opinion is equal to person B’s opinion, so we just get stuck in a deadlock.

This isn’t the system we’re running; this isn’t OpenGov. Similar to the governance of a large company, your opinion is weighted to the number of shares/coins you hold. No one wants to accept this; it feels unfair, the small holder should also have a large impact on the network. Personally, I disagree; if you have little to no stake in the network, then your incentives are misaligned. We already have collectives you can join if you would like to increase the impact of your voice, e.g., The Guppies. If we were a large multinational, we would have an executive step in, listen to all sides, and pull a trigger. During the BG era, we never had this; the VCs didn’t vote with their DOT, Parity/W3F needed to stay impartial, and there were no other whales willing to take the repetitional risk of entering the arena.

Then comes Giotto. I’ve spoken to him multiple times and listened to him speak at length for many hours. He and I disagree on most topics as we hold different mental models of Polkadot. I see DOT as a tech stack for financial assets that can be interconnected via XCM. I promote developers, coders, builders, and DeFi projects. He takes a more holistic view, trying to view DOT as a brand, ecosystem, and upgradable blockchain tool that should be interacted with. He champions marketing initiatives and empowers people to help themselves via countless community programs. Neither of us are right or wrong, just different.

He does possess one skill I’ve seen him use multiple times. A skill that almost no one in crypto holds: when the facts change, he can change his mind. This is why I’m long on Giotto contracts and why I support his efforts. With 90% of people in crypto, you don’t even need to speak to them to know their opinion. Just figure out what their incentive is and bingo, you’ve found their opinion. I have not experienced this quality in Giotto, or at least, he holds so much DOT that his incentives are aligned with the greater Polkadot community.

I believe one of two things will happen:

1. Giotto gets clipped by main crypto’s character syndrome and is taken down in a blaze of glory.
2. We all look back 5 years from now, having forgotten all the drama, Twitter beefs, and memes. Sitting on our islands, in our Lambos, and in my case, in front of my personal Bloomberg terminal, and we say, “Thank god for Giotto, he was the executive Polkadot really needed.”

If you like this, you can follow me on Twitter @OnlyDeFiGuy

You can also check out Giotto’s Twitter if you’re interested @giottodf

Polkadot OpenGov explained: <https://polkadot.network/features/opengov/#:~:text=Polkadot%20OpenGov%20is%20designed%20to,community%20are%20legitimate%20and%20transparent>.

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Polkadot’s New Main Character: Giotto 16DG

lol I can’t believe I made this, good times. 

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Our industry loves narratives, I’m not sure why. Over many years in many markets, I’ve come to the conclusion that people love narratives as without them you need to face facts with the random walk theory of financial markets.\*\* A stomach-churning proposition for any market participant. For example, the price of a flashy AI token gets bid up, onlookers instead of thinking the logical “more buyers than sellers,” they need to assign a storyline. A sort of logic their mind can comprehend

![](https://miro.medium.com/v2/resize:fit:700/0*OKxE3268TkJ5X9hC)

This is how we get to community members posting about the 10 top new narratives in crypto, when in reality their thread should say “the top 10 new tokens that have been pumped and the story I’m telling myself why.” The facts on the ground are, like it or not, narrative follows price, price does not follow narratives. If the price of an asset rises, confirmation bias directs the uninformed to literally go searching for good news to assign to this price move. When the facts on the ground merely show that there were more buyers than sellers, I do not believe narratives offer any edge or can predict prices in any way.

When we zoom out past some short-term social media posts and terrible technical analysis, I do like the idea of using narratives to tell a story. I find myself very regularly being asked to explain crypto to normal folk. I’ve always tried to avoid technical jargon and have used simple storytelling techniques to try to leave an impact on someone new to the industry. I always start simple: bitcoin is digital gold and Ethereum is software on money. Relatively easy topics to understand, but where does Polkadot fit in this equation?

To understand the value of Polkadot, let’s draw a comparison to a traditional shopping mall. On its own, a shopping mall is merely an empty shell — a collection of buildings and walkways devoid of any inherent value. However, when filled with a variety of shops, restaurants, and entertainment venues, a mall becomes a thriving hub of economic activity and a destination for consumers.

Similarly, Polkadot’s true worth is derived from the parachains, decentralised applications (dApps), and cutting-edge technologies that operate within its ecosystem. These projects, built on top of Polkadot’s robust and scalable infrastructure, bring utility, innovation, and value to the network, much like how individual stores contribute to the overall appeal and success of a shopping centre. If Polkadot has no successful parachains, then Polkadot itself cannot ever be a success.

Agglomeration Economies:

Have you ever wondered why all the clothes shops in your city are located next to each other? I’ve spent many days pondering the economy and could never understand why a new clothes shop would open directly next to all the other shops. My brain is always focused on the competitive free market, so the fact that GAP would open a new store on the exact same road as Primark, H&M, Nike, and countless others always baffled me. Would they not be better off finding a location where they could form a local monopoly in the discount clothing market?

Well, this is where agglomeration economics comes into play. These are localised economies in which a large number of companies, services, and industries exist in close proximity to one another. They benefit from the cost reductions and gains in efficiency that result from this proximity.

Don’t worry, you don’t need to understand this for this article. All you need to know is there are large competitive advantages to locating near your competition. Both via Agglomeration and in game theory, I’ll link an interesting TED talk about this below. Some examples of the benefits are cost reductions, gains in efficiency, ease of use for consumers, an ability to share information, and an inability to be exploited by aggressive competition.

To me, it’s clear that this is one of Polkadot’s biggest advantages. If a user is onboarded to Acala, then they can seamlessly also use HydraDX or any other parachain. We can share users, developers, knowledge, and resources. We should be leaning into these competitive advantages baked into our network. Unfortunately, this is something we rarely see. When you attend events or speak to founders, they always speak as if other parachains are in direct competition; it’s all become very political. A great example of this is the recent DED vs. PINK feud. I’m all for friendly competition, no doubt, but the deadlock they are currently in has become extremely counterproductive. Do the DED team not realise that if PINK is successful, that will increase their odds of success? Or does the PINK team not think that creating a positive memecoin culture will also flow down to their community? I don’t know, but I do know that this exact situation can be seen all over the ecosystem. DEXs fighting with DEXs, liquid staking providers at each other’s throats, influencer vs. influencer insult battles. It’s all a waste of time and a big ol’ negative value sandwich that is weighing the network down.

![](https://miro.medium.com/v2/resize:fit:700/0*NqV3N7VxUkIGKW5w)

For the Polkadot shopping mall to be a success, I leave you with this thought: we need to work harder to support each other and collaborate. We should avoid insulting each other and go the extra mile to treat other communities on Polkadot with respect. If the GameStop in a mall is launching a new console attracting large footfall, this will also increase the revenue of the Food Hall, H&M, and shoe store. Polkadot is the exact same; if the Mythical Games launch is a raging success in April, that will bring new users, capital, and participants to the ecosystem as a whole. We can only obtain the benefits of agglomeration if we treat each other with respect. So let’s all try to play nice.

If you enjoyed this, you can follow me on Twitter for more @OnlyDeFiGuy

![](https://miro.medium.com/v2/resize:fit:700/0*xsZbbOaaPmEEuARV)

Random walk hypothesis — The random walk hypothesis is a financial theory stating that stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted.

<https://en.wikipedia.org/wiki/Random%5Fwalk%5Fhypothesis>

Why do competitors open their stores next to one another? — Jac de Haan <https://www.youtube.com/watch?v=jILgxeNBK%5F8>

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Polkadot: Blockchain’s shopping Mall

Here’s the scoop: if you’re holding assets that are prone to inflation, the smart move is to get a yield that offsets the inflation. Think of it as giving your money a life jacket to keep it afloat!

For US dollars, treasury bills are the way to go. But when it comes to DOT, we’ve also got some options when staking. When you stake DOT, you are locking your assets on the Polkadot relay chain, these assets are used to secure the network and in return you receive the staking rewards.

You have many options, staking directly on chain or using a liquid staking product. This is where things get a little bit complex, there are many options. In this article I’m going to go through each of them, outline the pros /cons of each and give you a recommendation as to which one I believe is best for the majority of normal users.

First lets run through some basics to get us started.

* The Polkadot staking APY is roughly 15%. It can change as more or less users stake their DOT with the target staking rate of \~52%.
* If you want to unstake, you will need to wait a 28 day unbonding period.
* Liquid staking refers to products that will allow you to deposit DOT into a staking pool and in return you will receive a receipt token. This receipt token represents your percentage share in the DOT staking pool. Over time as this DOT pool earns more DOT rewards via the staking APY, your percentage share will also increase in nominal value.

Note: Generally on Polkadot they do not use rebase tokens, so the amount of liquid staking receipt tokens you own will never change. When you go to unstake them, you will be able to withdraw more DOT than you deposited. These extra rewards are the DOT you deposited + any earned staking rewards from the pool.

Your options:

Directly staking on chain — <https://staking.polkadot.network/>

You can use this application if you do not want to trust a parachain with your assets. It is arguably the safest way to stake. If you choose to use a nomination pool you can also partake in governance votes. I think the dashboard is beautifully made and shows all the relevant information you may need on your journey. There are no fees to use this platform so it is also the lowest fee option.

Pros:

* Easy to use.
* Native to Polkadot.
* Extremely safe and low cost.
* Nice dashboard to review and manage your holdings.
* You can partake in governance votes.

Cons:

* Once you stake your assets, you have no access to them.
* If you would like to unstake, you have no possibility of getting around the 28 day unbonding period.
* You will not be able to leverage these staked assets on other platforms.

![](https://miro.medium.com/v2/resize:fit:1400/0*4wrOx2NmHE62lV3U)

stDOT StellaSwap — <https://app.stellaswap.com/stdot>

When LIDO sunset their stDOT liquid staking product, the Stellaswap team took over its management. But the product is the exact same. It can be both issued and redeemed on the Moonbeam EVM and was developed by the LIDO team who have deep experience with liquid staking products.

Pros:

* Highly trusted developer team behind this technology
* Native to EVM for those that like using Metamask
* Easy to use, work with and unstake.
* Very large extra incentive programs are being offered on this product, allowing users to obtain the \~15% staking rewards + extra incentives.

Cons:

* StellaSwap applies a 10% fee on a user’s DOT staking rewards.
* A fast unstake option is offered but can be temperamental to use. This is as the fast unstake queue is cleared every ERA (day) meaning that if you are unable to fast unstake in the ERA you submit your unstake transaction to the relay chain and you will need to wait 28 days.
* Cannot be used to vote in Governance.

![](https://miro.medium.com/v2/resize:fit:1400/0*rdSMoseqGPEEja-3)

sDOT Parallel — <https://app-polkadot.parallel.fi/staking>

I never like to see people talking badly about crypto teams, more so than most I understand that this is a difficult game we play. But the facts on the ground are that the sDOT product offered Parallel finance has been through some tough times. There was a long period of time where it could not be unstaked. This has led to there being a large discount on their swap to buy these receipt tokens. I also am unsure if there is still a team of engineers working on their Polkadot offering at Parallel.

Pros:

* There’s a large discount on their DEX for this product.

Cons:

* There was a large period of time that this product was broken and could not be unstaked.
* The future of Parallel on Polkadot is uncertain.
* Cannot be used to vote in governance.

![](https://miro.medium.com/v2/resize:fit:1080/0*PFvg9bii7xI1yVyf)

LDOT Acala — <https://apps.acala.network/ldot>

Acala is one of the largest DeFi platforms on Polkadot at this point in time. They also were the first to win a parachain slot on Polkadot and have been operating their liquid staking product for some time. They are one of the longest running Polkadot teams and many of their developers have been building on Polkadot since its inception. The fees for fast unstaking are quite high but it is still possible to avoid the 28 day unstaking period.

Pros:

* One of the longest running staking products.
* There are multiple ongoing incentive programs for those willing to enter them.
* Is being used on multiple different parachains allowing for more incentive opportunities.
* You can see all the validators they are using and I can confirm they have never been slashed.

Cons:

* There’s a 10% fee on staking rewards. I cannot confirm this information in their documentation so it would be best to review this figure but I do know for sure there is a fee baked into any earned staking rewards.
* 1% fee when fast redeeming. This makes the asset much more tricky to arbitrage and to me seems unreasonably large.
* It is hard to see the fast redeem unstaking queue, you need to be careful when trying to unstake and ensure you are happy with the ‘expected to receive’ number shown on their UI.
* Cannot be used to vote in governance.

![](https://miro.medium.com/v2/resize:fit:1400/0*MIqaaatjw0TE3Alc)

vDOT Bifrost — <https://bifrost.app/vstaking/vDOT>

Currently Bifrost has the largest amount of DOT staked in their product and I can understand why. It works really well, their app has a great UI and the product is both cheap and easy to use. They do also hold one massive technical advantage over all of the other competitors. Their unstaking technology is both very original and an absolute pleasure to use.

In layman’s terms, I’ll explain how it works. Unlike the other liquid staking offerings, Bifrost uses a separate account to manage the unstake queue, this is really handy for users as it means your unstake request is not batched each ERA. So for example, we want to unstake vDOT and we submit this request, at this point in time there is no DOT available in the unstake queue. So an unstake request is sent onchain to retrieve your DOT from the pool, this begins the 28 day wait. But 3 days later a large staker deposits 50K DOT, instead of having to wait for your 28 unstake request to complete. Bifrost will use this newly deposited DOT to clear your unstake request. Meaning you avoid the 28 day wait! The total cost of this complex service is 0.1%, amazing.

Alongside this, you can also use your vDOT to vote in governance. Personally, I think the unstaking features are where all the value is, but I know many people like to make their voice heard on OpenGov so this is a great option for that.

They have also brought out a new feature called “Loop staking”. This will allow you to borrow against your vDOT, buy more vDOT and open a leveraged staking position. More risk, but potentially more fun too!

Pros:

* Fast unstaking is both very cheap and very easy. I’ve made 1000s of unstake requests and never had to wait 28 days.
* You can use your vDOT to vote on governance.
* Leveraged staking option
* Unstake fee is very favourable to users.
* Unstaking mechanism is an excellent experience.
* They have a super cool data link that shows some very interesting data about the protocol <https://stats.bifrost.app/d/2scn0X6nk/bifrost-analytics?orgId=1>
* I do also love that little chart they have on the UI.

Cons:

* There’s a 1% fee on any rewards earned while using the pool.
* You are limited to only 10 redeems at once, but this will only affect the most dedicated unstakers.

![](https://miro.medium.com/v2/resize:fit:1400/0*QJLXj8lGzFe7thBF)

Summary

Aside from Parallel finance, I would recommend all of these products. I have at one point or another held each of them myself and bid on all of these assets everyday. There are many situations where someone might want to use a specific product for their own benefit e.g. you may want to access an incentive program so would consider using LDOT from Acala. Or you like to LP with your liquid staking tokens so want to use stDOT on moonbeam. Both great choices. I also don’t want to understate the value in the native DOT staking dashboard, it’s been built beautifully and shows some really great stats and information about Polkadot.

But if I was asked to recommend which liquid staking product I would use. I would recommend vDOT from Bifrost. Not because of the low fees or ability to vote on governance, just because of their sensational unstaking process. Simply put, it’s just very easy to turn vDOT back into DOT. If the price of DOT rises very quickly you really don’t want to have to start a 28 day waiting period of praying that the market stays high and if you’re holding large amounts of DOT you wouldn’t want to sell this on a DEX.

I hope this article was useful and you have learned something, I think all of these teams have built some fantastic technology and I wish you all the best on your Polkadot Staking journey. If you liked this you can follow me on Twitter for more @OnlyDeFiGuy

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Everything you need to know about Liquid staking DOT

The company behind USDT made over 6B USD in net profit last year, let’s compare this to one of the largest real estate and financial institutions, Blackrock (ticker BLK) who cleaned up a tidy 5.5B USD during the same period.

Blackrock has over 19,000 employees and is one of the most sought after employers. From asset management, risk management, advisory services, ETFs and countless more complicated highly regulated and ultra competitive industries, Blackrock seems to do it all. Tether has roughly 125 employees, sitting in the sun watching transactions fly by. They take dollars off users then issue a stablecoin in return. They then put the money into treasury bills and that’s it. That’s their business, sexy right?

The idea of operating a large high liquidity stablecoin is very alluring to most. The business model is simple, risk (excluding regulatory risk) is low for the issuer, the profits can be obscene and the operating leverage is to die for. Add to this stablecoins are a part of the market that does have both product-market fit and a large total addressable market. Exciting so lets start one up and see if the VC money well has some appetite for our scheme?

We’d better hold up here and evaluate our stablecoin options. How do we want to build this, what mechanism will keep our token at 1 dollar, will it be decentralised and how will we get the initial liquidity. Lets run through some examples of stablecoin models that have been tried in the past and we’ll see what we can find.

Collateral debt positions — MakerDao DAI

MakerDao is a decentralised protocol that issues the DAI stablecoin, they use collateral debt positions to enable this. This means that if a user wants to mint 1 DAI they will need to deposit crypto assets with a value greater than 1 USD + the maintenance margin requirements (a buffer) then they can mint some DAI. The protocol keeps its dollar peg as users with open vaults are incentivised to buy DAI once it goes below 1 USD in value. This is because this would allow them to repay a loan of 1 USD with less than 1 USD of input value. Users who mint DAI would pay an interest rate to the protocol which would generate revenues for makerDao.

Pros:

* This is one of the few models that can maintain full decentralisation.
* Technically speaking, all of the issued stablecoins are backed at least 1:1 with liquid assets that can be sold to cover positions that fall out of margin compliance. Crypto teams/communities love this fact as it makes for easy marketing.
* The nature of this model means it can generate demand from users who are interested in acquiring more leverage. As these users can deposit assets, borrow DAI and swap DAI for more assets.

Cons:

* This model is extremely inefficient. If a protocol wants to issue 1 billion stablecoins it would need in excess of 1.5B USD in deposited TVL. This is because most large users will want to avoid liquidation at all costs. They will ensure they have enough assets deposited in their vault to far exceed their margin requirements. Meaning, this model scales terribly. Having to take in 1.5 USD just to issue 1 USD is a wager I would not be willing to take.
* Requires huge amounts of decentralised community buy in. If a user’s vault falls out of margin compliance, they will need to be liquidated by an independent actor or have their assets sold on a DEX. The token trades below 1 USD, a user with an open vault will need to step in and bid. This means that before you can start to pitch your asset to real world use cases. You need a small army of independent, well capitalised, technically savvy users that can take these actions on your behalf. A tricky proposition for a new crypto start up.
* Upper limit to your success. The amount of stablecoins that can be issued by makerDao is dependent on two things. First the amount of DEX liquidity that vaults can be liquidated into and second the number of active liquidators willing to liquidate user vaults. If they don’t have enough of either of these, they would need to limit more issuance or risk bad debt on the protocol.

Algorithmic stablecoins — TerraUSD (UST), Frax (FRAX)

I never really liked how we collectively named this model type “algorithmic” as literally everything in crypto can be boiled down to some algorithms. Alas, it is what it is. Algorithmic stablecoins are a type of cryptocurrency designed to maintain a stable value, typically pegged to a fiat currency, through the use of dynamic algorithms.

What does this actually mean though? The issuer of an algorithmic stablecoin would have a series of rules that can be leveraged to try and maintain the peg at 1 USD. For example, if the token is below 1 USD, reduce the supply of the token. Or in UST case, if the token is below 1 USD it can be bought and converted into 1 USD worth of Luna and then sold to retrieve the 1 USD.

Pros:

* Increased efficiency, unlike a collateral debt position. If a user deposits 1 dollar, they can get 1 stablecoin back. Depending on the specific model, this can mean that algorithmic stables can be the easiest model to grow.

Cons:

* Hard to explain to non-crypto natives and a lack of “1:1 backing” makes many nervous.
* Much harder to maintain peg. As there are a dynamic set of rules always moving and changing. This means that it will be much harder to convince the market that this token will be worth 1 dollar today and in the future.

![](https://miro.medium.com/v2/resize:fit:700/0*Hz9ogvqa75WOkwtp)

Centralised regulated issuance — Circle (USDC)

Circle is a financial technology firm that focuses on providing payment and financial infrastructure for the internet, including the issuance of the USDC stablecoin. USDC (USD Coin) is a stablecoin cryptocurrency pegged to the US dollar, meaning each USDC is theoretically equal to one US dollar. In short, you give Circle 1 dollar, they put it into their bank account and give you back 1 USDC.

Pros:

* Stability, by pegging USDC to the US dollar and maintaining full audited US based reserves, it is much easier to trust and therefore much easier to maintain a peg.
* Regulated status, there are many companies that are only willing to work with regulated institutions. Circle is one of the few that can do this and it enabled them to do deals others could not. E.g. Coinbase, USDC on Arbitrum deal.

Cons:

* Circle has \~1000 employees, expensive ones too. They will have whole floors full of compliance staff. Staff that, in reality, add little to no value to the core product. They tick boxes and review accounts all in the name of being fully regulated.
* Regulators, Circle are front and centre with US regulators. Who’s to say they don’t catch a stray blow intended to weaken the crypto industry. The amount of funding, paperwork, AML and compliance that circle have to do on a daily basis would amaze us all. A painful and expensive price to pay just to be “US regulated”.
* Relies on the US banking system, which itself operates under ‘fractional reserve banking’. Meaning, Circle has deposits at a bank 1:1 with issuance but the bank, they only hold 10–15% of these deposits cash in hand. These deposits are of course, FDIC insured but only up to 250K per depositor.

Centralised unregulated issuance — Tether (USDT)

Kings of the industry, making more money than the meanest on Wall Street. Everyone’s favourite stablecoin? Well think again. Tether, much like Circle, has a simple issuance model. You give them dollars and they hand you back stables. But unlike Circle they choose to take the unregulated route, this does offer them much more flexibility, lower costs and easier onboarding of new clients. But it comes with a painful truth. The real issuer of the Dollar, Uncle Sam. Doesn’t like the fact that “crypto is making money out of thin air”, or at least running a US dollar based business and not bending the knee and paying the fee.

Pros:

* Linear efficiency, 1 dollar in equals 1 stablecoin out.
* Lack of regulatory guidance makes progress much less restricted. This led to USDT being one of the first to market in a big way.
* Highly profitable business if issuance is high.

Cons:

* Forced to hide USD bank deposits out of fear of the regulators.
* Lack of regulation / being based “offshore” draws the attention of regulators further, also limiting the deals that can be done.

Summary

I could go on all day, there are many different types of stablecoins. Each with their own twist or feature that makes them unique. But the rarely spoken facts are, it is extremely difficult to operate a stablecoin. Remember, if you keep the peg 99.9% of the time that’s a failure in the eyes of the market. You are required to work extremely hard to maintain your peg as without it, your project is worthless.

Even if you have a great way to do this, it’s even harder to achieve real adoption. Ask yourself, when was the last time you used a stablecoin at a traditional business? Can you pay your taxes in stablecoins, no. This leaves protocols in a situation where they are desperately trying to find demand drivers to encourage new money to bid their market.

Figure this out, oh well the regulators are coming to check in on you. Remember, regulators aren’t going to go after a project that is tiny, forgettable and small. But many lawyers would love to make their career taking a successful crypto founder down a peg (pun intended).

Lastly, I have many conversations with people that seem to think. “Oh well it’s a stablecoin, it’s worth 1 dollar right now , so it will always trade at 1 USD”. In trading, this would be the equivalent of coding stablecoin === 1 USD. A line of code that has taken down many crypto market operators. It’s foolish to think this, for anything to happen in crypto. Many independent actors need to take action, understand the protocol and submit real transactions. Crypto isn’t magic, it’s real people making real decisions. If for some reason, those real people turn on you, refuse to cooperate or worse attack your peg you are going to have a very bad time.

![](https://miro.medium.com/v2/resize:fit:480/0*3htUJGGVHwAHGj6e)

I often hear ideas of “community stablecoins” , fully unmanaged decentralised stablecoins. I.e. they see the rewards but none of the risks. These ideas, like most future stablecoins will probably blow up and end in tears. I’m not saying stablecoins will die, or that we won’t see new ones. The incentive is so large for the winner that many will take the risk. I just wanted to write this piece to stress stablecoins are hard, very hard and should not be underestimated. Proceed with caution.

If you liked this, you can follow me on Twitter for more!

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Stablecoins are hard

I have an odd quirk to my personality: I often assume that everyone else knows exactly what I know, while simultaneously being certain that they possess vast amounts of information that I do not. In that spirit today I’m going to talk about a topic that, to me, is very obvious and self-evident but it is a core pillar of my understanding of how all markets operate.

Whether trading in equities, options, bonds, crypto, or DeFi, approximately 80% of transactions and trading volume are executed by algorithms. This is a manifestation of the Pareto Principle, or the 80/20 rule, which we observe in many industries: a tiny subset of users generates the majority of both activity and revenue. Examples include gambling, mobile gaming, and music.Let’s take a quick look around some markets and see if this holds up.

HydraDX:

![](https://miro.medium.com/v2/resize:fit:700/0*peaNJFmrg3qAljgf)

The above picture shows us that on a daily basis there are between 5 and 10 wallets that are submitting over 1000 swap transactions each day. As the chart says, these wallets are algorithms that are trading short tail opportunities (trading opportunities that arise very often). You don’t even need to check on-chain to see this, I know for a fact that just on this list both the SunFlower and Duck are fellow bot operators. I know this as I trade against them so I can see their pending transactions but it also doesn’t take a rocket scientist to figure out that manually submitting utilityBatch\_All transactions is almost impossible to do in real time.

![](https://miro.medium.com/v2/resize:fit:700/0*GmT40Bvorj1NBR9C)

Uniswap:

HydraDX is most definitely not an outlier, we see the same situation on Uniswap. Algorithms are doing by a large margin the most transactions and extracting the most value from the platform. A large part of this as you can see is Sandwich attacks, which of course cannot even be executed manually so would always require an algorithm and in most cases even a bespoke smart contract too.

![](https://miro.medium.com/v2/resize:fit:700/0*F1kHNz569HaMKkgJ)

Traditional markets:

I always have a good chuckle when people act like markets in crypto are vastly different or a “paradigm shift” from traditional markets. When in reality both crypto and traditional markets are far more similar than they are different. It’s my belief that crypto is just trying to speedrun traditional financial markets history. We make the same mistakes they did, we have a similar market structure, the same risks and the trading strategies being deployed are so similar they can be copy/pasted back and forth at will.

![](https://miro.medium.com/v2/resize:fit:666/0*tLB6dIKAZSfcrt-6)

And yet again, the markets are dominated by bots. A fact I personally find very interesting is shown in the below picture. Citadel (large HFT/market making firm) is touching huge percentages of the total daily volume on all US listed securities. If you have ever traded a US stock you more than likely bought or sold it to Citadel. On some days, Citadel trades 1 in 4 of the total traded stocks on the NASDAQ. The speed, size and scale of their operation is amazing and it’s one of the reasons we have seen spreads on US listed equities tighten significantly over the last 20 years.

![](https://miro.medium.com/v2/resize:fit:700/0*loyKNFonhIxhvWHe)

Summary:

After all this, I hope you can believe me. In markets, it’s all bots! So what does this actually mean, how should this change our view of the market. Well there are generally three types of players in our game. The protocol team/Dapp, traders and users.

Users; This category of player if they can avoid selling out of the money options or submitting transactions that can be taken advantage of are one of the big winners from Pareto Principle. They get to trade on tight spreads and when they arrive at an DEX generally they can buy/sell at reasonable prices.

Protocol Teams/Dapps; Our discussion today heavily affects this demographic, if you run a protocol and you have yet to figure this out, you’re in trouble. As I’ve said, most of your volume and revenue is going to come from a tiny subset of users. Catering to these users should be of the highest priority. Why? As 1 bot operator will do the same number of transactions as 10,000 normal users. If you want those nice metrics to bring to the VC money well, you had better spend some time writing your developer documentation.

Traders: My favourite players in this game, the gladiators in the arena trying to do the impossible and beat the market. Our bot operators also fall into this category. If this is the game you choose to play, in my opinion you have two options. You can either roll with the punches, also build your own bots to trade for you and enter the bot wars. Or alternatively you can move forward with the understanding that competing on short tail opportunities (simple arbitrage is a great example) is going to be very difficult. This does not mean you can’t make money, but you’ll need to leverage your flexibility, quick thinking and nimbleness to attack opportunities that have not already been dominated by an algorithm.

I hope you enjoyed this piece and took some learning from it. If you like cryptocurrency, DeFi or financial markets you can follow me on Twitter for more @OnlyDeFiGuy.

[ ](https://medium.com/tag/bots?source=post%5Fpage-----05859047ae07---------------bots-----------------)

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It’s all bots

Polkadot is on the cusp of a significant shift in how blockchain resources are allocated and monetised. The upcoming transition to the Agile Coretime model, set to go live on Polkadot in July following its debut on Kusama, promises to bring unprecedented flexibility and efficiency to the network. Let’s dive into what this means.

Understanding Agile Coretime: Agile Coretime is a groundbreaking approach that enables the buying and selling of blockspace in a dynamic, market-driven manner. It moves away from the static parachain leasing periods of Polkadot 1.0 and introduces a more flexible and cost-effective way to acquire and manage network resources.

Key Components of Agile Coretime:

1. Cores: Cores represent the virtual abstraction of computational resources provided by the relay chain to secure parachain blocks.
2. Coretime: Coretime refers to the time allocated for utilising a core, measured in relay chain blocks.
3. Bulk Coretime: Bulk coretime is a fixed duration of continuous coretime represented by an NFT. These NFTs can be split, shared, or resold.
4. On-demand Coretime: On-demand coretime allows for the authoring of a parachain block on-demand, acquired through bidding in near real-time.
5. Coretime Chain: The Coretime Chain is a system parachain responsible for the sale and manipulation of bulk coretime, as well as the scheduling of cores on the relay chain.

How Agile Coretime Works: Under Agile Coretime, sales occur on the Coretime Chain in two main periods: the Renewal period and the Sale period. During the Renewal period, bulk coretime can be renewed. The Sale period consists of a Price Discovery period, where a Dutch auction determines the equilibrium price, followed by a Fixed Price period.

Splitting and interlacing allow for the division of regions, providing further flexibility in resource allocation. Elastic scaling, currently under development, will enable projects to seamlessly scale and access multiple cores as needed.

Opportunities and Implications: Agile Coretime brings several benefits and opportunities:

1. Democratisation of Access: On-demand coretime lowers barriers to entry, allowing developers to quickly spin up proof-of-concepts and access Polkadot’s ecosystem.
2. Cost Efficiency: By purchasing coretime on-demand or selling unused coretime on secondary markets, projects can optimise their resource usage and costs.
3. Predictable Resource Planning: Bulk coretime enables strategic resource planning, allowing projects to secure coretime at fixed prices and plan for sustainable growth.
4. Secondary Markets: The ability to split and sell coretime opens up opportunities for secondary markets, improving allocation efficiency and enabling speculation.

Trading Opportunities and Risks in Agile Coretime

The introduction of Agile Coretime presents new opportunities to potentially profit from the dynamic market for blockchain resources. However, as with any trade, there are risks to consider.

Opportunities for Traders:

1. Price Volatility: The market-driven nature of Agile Coretime may lead to price fluctuations based on supply and demand. Traders can potentially capitalise on these price movements by buying coretime during low-demand periods and selling when demand surges.
2. Speculation on Future Demand: Traders with a keen understanding of the Polkadot ecosystem and upcoming projects may be able to anticipate future demand for coretime. By securing coretime in advance and selling it when demand increases, traders could potentially profit.
3. Arbitrage Opportunities: With the emergence of secondary markets for coretime, there may be opportunities for arbitrage. Traders can look for price discrepancies across different markets and exploit these differences for profit.

I’ve spent the last few weeks trying to consider how someone could extract MEV from this new marketplace, aside from trying to arbitrage the open market and open sell orders on an exchange. I think this will be hard to do, remember if you don’t use your core time in your time period it expires worthless. So use it or lose it.

Risks to Consider:

1. Market Unpredictability: While the market-driven approach of Agile Coretime allows for greater flexibility, it also introduces a level of unpredictability. Sudden changes in demand or unexpected market events could lead to rapid price fluctuations, potentially leading to losses for traders.
2. Lack of Historical Data: As Agile Coretime is a new model, there is limited historical data to analyse and base trading decisions upon. This lack of historical context may make it more challenging to develop reliable trading strategies.
3. Technical Understanding: Trading coretime effectively may require a deep understanding of the Polkadot ecosystem, the Coretime Chain, and the technical aspects of parachain operations. Traders without this knowledge may face increased risks.
4. Liquidity Risks: The liquidity of the coretime market may vary, especially in the early stages of adoption. Low liquidity could make it difficult to enter or exit positions at desired prices, potentially impacting trading profitability.

Favourable Situations for Trading:

1. High Demand Periods: During times of high network activity or the launch of popular projects, demand for coretime may surge. Traders who have secured coretime in advance could potentially sell at a premium during these periods.
2. Network Upgrades or Ecosystem Developments: Polkadot network upgrades or significant ecosystem developments may drive increased demand for coretime. Traders who stay informed about these events could potentially position themselves to benefit from the resulting market movements.
3. Inefficient Market Pricing: In situations where the market may be mispricing coretime relative to its intrinsic value or future potential, traders with a strong understanding of the ecosystem could identify and capitalise on these inefficiencies.

From where I sit, it’s hard to predict what prices or demand will look like once this model is live on Polkadot, I guess we’ll just need to see this go live and watch it play out, speculating on what could or might happen in the future is a fools game, but what an exciting time to be working on Polkadot. It really feels like we’re at the start of something big.

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Core Time Sales on Polkadot: A New Era of Resource Allocation Assets

If you’ve come this far, you probably know what a liquidity pool is.

Lets double click anyway, V2 liquidity is the original Uniswap. You may know this as an AMM, automated market maker. We use this technology to avoid the need for centralised market makers. Two tokens get deposited and a basic rule determines what price each token trades for. This rule is known as x \* y = k

![](https://miro.medium.com/v2/resize:fit:349/0*7258S1dcmpX-3_vq)

I’ve always liked to think of these markets as a big table. On each side is one token and where they meet in the middle is the market price.

But our table has to be covered fully with tokens. Meaning all along the table is evenly spread with tokens. From top to the bottom of the table, each side is filled with tokens.

If you want to trade one token for another, you place tokens on one side of the table, and the table will give you back the other token. This places more tokens on the side of the depositing token and removes tokens from the side of the token you want. As more tokens are on the side you’ve deposited and less on the withdrawal side, you’ve moved the market price. Simple, right.

![](https://miro.medium.com/v2/resize:fit:700/0*zLUsvQEICcuid2to)

Last time you ate breakfast, did you spread the food evenly around your whole table? It would be a challenge even for the most motivated to collect their corn flakes in this situation. So we use a bowl to control the location of our cornflakes during this delicious transaction. This is the core issue with V2 technology, liquidity is spread evenly between 0 and infinity dollars. Do we really need to provide liquidity at prices up to infinity dollars, probably not.

This brings us to V3 or concentrated liquidity pools. These pools allow users to determine which prices they would like to provide liquidity at. In layman’s terms, you would like to provide liquidity to an ETH-USDT pair. You select the prices at which you want to do this. E.g. between 1500 USDT — 3000 USDT.

Coming back to our table, you can see that the market price is still where our tokens meet. But instead of having tokens sitting out of reach, all our tokens are providing liquidity at market prices that are likely to be traded at. This allows users to access more tokens each time they deposit. While allowing liquidity providers to have more of their tokens in reach of hungry market participants. Our guests now get more tokens per handful and less are wasted sitting out of reach at the bottom of the table.

![](https://miro.medium.com/v2/resize:fit:700/0*yTHAPMfM6WDSrmF-)

The mechanics of these liquidity provision transactions are also slightly different. When you provide liquidity to a V2 pool, everyone gets the same liquidity pool tokens. These tokens are a receipt for your percentage share of the liquidity pool. When you want to withdraw, you burn these tokens and you get your fair share of the two deposited tokens back.

When a user provides liquidity to a V3 pool, as everyone may have selected different prices. Each provider is given a unique NFT as a representation of their position in the pool.

![](https://miro.medium.com/v2/resize:fit:600/0*GTr_h0hnO0LHnGkF)

The benefits of using V3 over V2:

Increased capital efficiency: V3 pools allow liquidity providers to concentrate liquidity at specific price ranges, this results in higher capital efficiency and in turn more trading fees generated per dollar of liquidity provided. Everyone gets more ‘bang for their buck’.

Flexible fee structure: This new breed of liquidity pool, also comes with diverse fee structures. Many are variable, others are fixed (0.05%, 0.3%, and 1%). This new optionality enables more choice for each protocol. E.g. Many would be willing to accept lower trading fees for low risk correlated pairs like USDT-USDC.

Lower slippage for larger trades: As there are more tokens provided per price tick, this enables traders to place significantly larger trades in the pool while avoiding a large market impact.

Non-fungible liquidity positions: LPs’ liquidity positions are no longer fungible because they can now offer liquidity in certain price ranges. This allows liquidity providers to optimise their returns, deploy advanced trading strategies and express their market opinion in a bespoke manner.

If you would like to read more about capital markets, decentralised finance and cryptocurrency then you can follow me on twitter for more! @OnlyDeFiGuy

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Diving Deep Without Drowning: Why DeFi’s Future Is Concentrated Liquidity

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In the world of decentralised finance, there’s a dark and mysterious place known as “The Dark Forest.” This is where the forest folk, bots and traders compete fiercely to exploit profitable opportunities through MEV.

MEV, or Maximal Extractable Value, is a powerful concept that has taken the blockchain world by storm. It refers to the maximum value that users can extract from a blockchain by leveraging their understanding of block production mechanics. By strategically ordering, inserting, or reviewing pending transactions, savvy users can unlock significant profits.

In the fast-paced world of crypto, information is power. MEV is like having a crystal ball, granting users perfect insights into future block production. With this knowledge, a wide array of profitable opportunities emerge. Arbitrage becomes viable, allowing users to capitalise on price discrepancies across different platforms. Front and back running, once the domain of sophisticated traders now become accessible to anyone with the right MEV strategies.

One crucial aspect of MEV is the ability to monitor and analyse the mempool. This is the pool of pending transactions waiting to be included in the next block. The mempool provides a real-time view of the transactions that users are submitting to the chain. By observing the mempool, MEV searchers can gain valuable insights into market activity, user behaviour, and potential opportunities for profit.

For example, by monitoring the mempool, an MEV searcher might notice a large pending transaction that could significantly impact the price of a particular token. Armed with this information, they could quickly submit their own transaction to buy or sell the token before the price changes, capitalising on the anticipated price movement. This is just one example of many that could be profitable in the dark forest.

Moreover, advanced MEV techniques often involve strategically placing transactions in the mempool to influence the order in which they are included in a block. By carefully crafting and positioning their transactions, MEV searchers can take advantage of other users’ transactions.

The Good and the Bad of MEV:

MEV transactions can be both beneficial and malicious. Let’s explore two examples:

The Hero: Imagine a savvy operator who monitors the blockchain for mis-priced assets. They see that due to a large sell order, the opportunity to buy this token then sell it again in the same block would be profitable. This user would then trigger a function on their own smart contract which would atomically buy a token in Pool A and then sell it in Pool B. All in the same transaction.

We see many examples of this, below is a GLMR-MANTA trader that used his smart contract to batch a transaction allowing him to trade a synthetic DOT-MANTA pair which does not natively exist on chain. These actors not only submit the majority of on-chain transactions, but they are life blood of every DeFi application. Without them, pools would be mis-priced, collateral would go unsold and native yields would be extremely low.

![](https://miro.medium.com/v2/resize:fit:700/0*2Mx48wguFEwt0ylf)

The Villain: Picture a nefarious bot waiting for you in the forest, hidden in the trees. You submit a transaction to buy your favourite memecoin. In the shadows, the algorithm sees this transaction being submitted. Reads the transaction details and sees that you are trying to buy DED with USDT but you have set your slippage to 10%. Noticing this opportunity, the searcher submits their own set of transactions. The first pays a higher gas fee than your transaction, and buys DED tokens, pushing up the price. Your transaction then is confirmed to buy at this higher price. The attacker then submits another transaction straight away selling these DED tokens back into the pool at the higher price. You get a worse price, and they collect the slippage you set on your transaction. This is a sandwich attack.

A very popular pool to do this was the LcDOT-DOT pool on Acala. Since inception many people have operated back running and sandwich attack strategies in this pool. Below is a perfect example of wallet u7xska seeing large sell orders pending in the memepool, realising this and placing their own buy order later in the block to benefit from this lower price. A fantastic back running strategy. These strategies are not limited to only this pool, searchers are now on every parachain watching transactions trying to profit all the time.

![](https://miro.medium.com/v2/resize:fit:700/0*7fR_PFDLn5m_wJuD)

*Top Tip* If you want to avoid being sandwich attacked or taken advantage of, just set your slippage to a low number. This will make it much harder to extract value from your transaction.

The future of sandwich attacks:

When volumes fell and uninformed traders were sparse during the bear market. We saw a new type of attack occur. Users became wise to sandwich attacks and began to set their slippage very low. Well this must have shook the dark forest to its core? Think again, a more cunning strategy is now being deployed.

The new strategy goes like this, Alice wants to buy PINK meme coins, she knows from Twitter to set her slippage low. But hidden in the bushes an algorithm sees this and submits its own buy order. The algorithm’s order gets filled, pushing up the price. Sadly Alice’s order fails. Believing that “DOT is Pink” Alice is determined to buy her tokens. She submits another order and gets filled at the higher price. Practically speaking, if someone wants to buy X token now and is unable to, they are highly likely to still be in the market for that token. The forest folk know this.

Now, another random buy order gets submitted… what? We thought the attack was on and it is so why did the attacker not sell. This attacker is happy to wait. 5 minutes pass, another buy order is filled. Then all of a sudden a new actor comes along and submits a sell. The algorithm will now decide to sell Alice’s front run tokens. They’ll place their order once more in front of this new sell order and the attack has been completed.

In the ever-evolving landscape of the dark forest, the cunning and adaptable forest folk are constantly devising new strategies to maximise their profits. Like the shifting shadows and rustling leaves, their tactics are always in motion, adapting to the changing environment and the behaviour of their prey. As an investor or builder in the DeFi space, it is crucial to remain vigilant and aware of these ever-changing dynamics.

![](https://miro.medium.com/v2/resize:fit:700/0*m7UIINGEHXSFlX3B)

Polkadot’s MEV Landscape:

While Polkadot’s architecture differs from traditional MEV-enabled chains, it’s not immune to the challenges of MEV. Polkadot’s parachains block production is handled by a consortium of collators who collect parachain transactions from users and produce state transition proofs for Relay Chain validators. MEV searchers can still operate in this domain. Meaning the dark forest is alive and well on Polkadot, I just hope you won’t get lost in it as I have.

If you would like to read more content about Decentralised finance, crypto and MEV you can follow me on Twitter for more @OnlyDeFiGuy

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Navigating the Dark Forest, Polkadot’s MEV arena

My dad always told me, “the best way to learn is to do”, I couldn’t agree more. Almost everything I’ve learned in crypto has been by reading the documentation, spinning up a new wallet and testing protocols out. In that spirit, today I’m going to offer you 3 different Polkadot trading strategies that you can deploy today to get your beak wet. I’m going to list them in order of complexity, offer no code strategies and I will attach each applications documentation below so you can review.

Lending Stablecoins:

Similar to traditional financial markets, we have money markets in crypto. Money markets are a place where you can lend and borrow with other market participants. Borrowers are required to both pay an interest rate and deposit sufficient collateral to ensure the loan can be repaid at all times.

On Polkadot we have many of these markets, Interlay, Moonwell and soon Bifrost. There is a range of assets you can both lend and borrow but to keep it simple we’ll stick to stablecoins for now. At the moment there are some great APY to be had. 25% on Interlay USDT and 29% on Moonwell USDC.wh (Wormhole)

The advantage of this strategy is it is simple, you can do the transactions and move on with your life. No need to manage your positions actively and little market risk as you are dealing in stablecoins. I cannot stress this enough, making 25% in the stock market would be seen as a record return. If you can capture that with a couple of transactions on Polkadot, then why not?

Stablecoin Strategy:

* Get USDT on Binance
* Withdraw to Statemint a.k.a AssetHub
* Bridge assets to either Interlay or Moonbeam
* Deposit stablecoins into the money market.
* Collect APY

![](https://miro.medium.com/v2/resize:fit:700/0*39-hV-rnvVgf30ed)

![](https://miro.medium.com/v2/resize:fit:534/0*0nxIEIsD50ccw-cD)

Doing hard and useful work:

In all markets, cooperating with the hand of the free market pays. If you’re willing to do hard, dirty work you will be offered great rewards. This brings us to our next strategy, it’ll pay more but requires more work and patience.

There are many liquid staking tokens on offer on Polkadot, vDOT, LDOT, stDOT. In short, users deposit DOT into the staking pool and get issued with liquid staking receipt tokens which represent their percentage share of the DOT staking pool.

E.g. if you deposit 1 DOT into stDOT now, you will get 0.9480 stDOT in return. It’s the same the other way around, if you unstake 1 stDOT you would get 1.0549 DOT in return. This ratio changes every ERA (day) as more DOT is earned from staking rewards and deposited into the pool. You can easily review the current ratio on each application directly. When a user wants to convert their liquid staking tokens back into DOT, they have two options. Either sell their receipt tokens into the pool or unstake and wait 28 days.

People hate to wait, this is our edge.

So we now know from this above example, if we can buy 1 stDOT for less than 1.0549 DOT we would make a profit. We would just buy the token, unstake it and wait 28 days.

We’ll have to do some maths for a moment, but bear with me.

DOT has a staking reward of roughly \~15%, so over 1 month you’ll make \~1.17% (calculated as (1 + 0.15)^(1/12) — 1) return just staking and holding a liquid staking token. Meaning for us to be better off than just staking DOT, we would need to be buying at discounts greater than \~1.17% after transaction fees.

All of these liquid staking tokens are listed in many venues giving us ample opportunity to look around. For example, over the last 2 weeks, stDOT on StellaSwap has been trading at a 3.7% discount to its redeem price! This is a big pool, you can trade thousands of DOT at this price. Running the numbers we see that if you earned 3.7% a month every month for a year that would net you \~55% return in 1 year. A crazy number, the power of compounding at work.

The only downside of this strategy is it’s hard work, you need to look through pools, figure out ratios and discounts then submit the appropriate transactions. It’s work, but it’s not complicated and there are endless opportunities like this for those willing to deal in liquid staking tokens.

Doing hard work strategy:

* Hold DOT on chain
* Review prices of liquid staking tokens and their ratios
* Buy liquid DOT tokens at a discount greater than 1.17%
* Unstake
* Wait 28 days
* Repeat

![](https://miro.medium.com/v2/resize:fit:422/0*jiXzcDqEwjChjGru)

Chasing returns in V3 concentrated liquidity pools:

If I wasn’t a developer and I wanted to make serious money in DeFi this is what I would spend my time doing. But beware, with great rewards comes greater risk. I’m going to presume you know what concentrated liquidity is, if not you can read my previous article or watch the finematics video linked below.

When we provide liquidity in a V3 pool, we pick our price ranges and concentrate our liquidity. The tighter we set our range, the more trading fees we earn as more of our tokens are being bought and sold during each transaction that goes through the pool.

So if you can predict rough price ranges in high volume pools, you can collect obscene amounts of fees. Remember most of the V3 liquidity on offer on Polkadot is not tightly concentrated, its teams or project investors trying to provide initial liquidity to these pools and setting very safe ranges. This gives the highly active liquidity provider an edge as they can very nimbly adjust their ranges on a daily basis to ensure that they are always collecting a very large portion of the trading fees going through the pool.

I was running an atomic batch transaction trading strategy in a d20 pool and I saw another wallet using 2600 USD of assets to provide ultra tight liquidity, as I was very active in this pool he was making between 400–500 USD a week. Making that kind of return is an amazing way to spin up an account for a motivated DeFi operator who has a low bankroll.

Now bare in mind, this user needed to do 3 things.

* Find pools with high volume and incentive rewards
* Concentrate his liquidity to a very tight range and adjust his range multiple times a day
* Manage his impermanent loss risk

As our user was providing such tight liquidity, if the market was to move significantly this user takes on an impermanent loss. This is why you need to be extremely active and manage your risk appropriately. This isn’t a strategy for part-time market participants. You need to be very motivated to get this to work at the highest levels of efficiency.

Chasing returns strategy:

* Find a concentrated liquidity pool with high volume, incentive rewards and few others providing highly concentrated liquidity
* Use Bollinger bands or basic technical analysis to estimate a price range
* Providing liquidity to this price range
* Collect excessive shares of LP trading fees.
* Be extremely nimble moving into and out of positions.

![](https://miro.medium.com/v2/resize:fit:700/0*CnK_6bKf4FygJR4F)

All of these strategies can and do make money, just be careful to manage your risk on each transaction, keep a level head and always try to understand why you’re getting paid and not just how.

Thanks for reading, If you like Polkadot, decentralised finance and crypto, you can follow me on Twitter for more @OnlyDeFiGuy

Relevant links:

Interlay: <https://docs.interlay.io/#/guides/lending>

Moonwell: <https://docs.moonwell.fi/moonwell/moonwell-overview/lend/supply>

stDOT StellaSwap: <https://docs.stellaswap.com/how-to-guides/wstdot>

Finematics V3 video: <https://www.youtube.com/watch?v=Ehm-OYBmlPM&t=354s&pp=ygUOZmluZW1hdGljcyAgVjM%3D>

Bollinger bands: <https://www.investopedia.com/articles/technical/102201.asp>

Concentrated liquidity: <https://docs.uniswap.org/concepts/protocol/concentrated-liquidity>

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So you want to get paid on Polkadot?

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WagMedia

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Polkadot Ireland

Came for the future of finance, stayed for the MEV.

In the world of decentralised finance, there’s a dark and mysterious place known as “The Dark Forest.” This is where the forest folk, bots and traders compete fiercely to exploit profitable opportunities through MEV.

MEV, or Maximal Extractable Value, is a powerful concept that has taken the...

lol I can’t believe I made this, good times.

I have an odd quirk to my personality: I often assume that everyone else knows exactly what I know, while simultaneously being certain that they possess vast amounts of information that I do not. In that spirit today I’m going to talk about a topic that, to me, is very obvious and self-evident...

If you’ve come this far, you probably know what a liquidity pool is.

Lets double click anyway, V2 liquidity is the original Uniswap. You may know this as an AMM, automated market maker. We use this technology to avoid the need for centralised market makers. Two tokens get deposited and a basic...

Here’s the scoop: if you’re holding assets that are prone to inflation, the smart move is to get a yield that offsets the inflation. Think of it as giving your money a life jacket to keep it afloat!

For US dollars, treasury bills are the way to go. But when it comes to DOT, we’ve also got some...

Polkadot is on the cusp of a significant shift in how blockchain resources are allocated and monetised. The upcoming transition to the Agile Coretime model, set to go live on Polkadot in July following its debut on Kusama, promises to bring unprecedented flexibility and efficiency to the network....

The company behind USDT made over 6B USD in net profit last year, let’s compare this to one of the largest real estate and financial institutions, Blackrock (ticker BLK) who cleaned up a tidy 5.5B USD during the same period.

Blackrock has over 19,000 employees and is one of the most sought after...

My dad always told me, “the best way to learn is to do”, I couldn’t agree more. Almost everything I’ve learned in crypto has been by reading the documentation, spinning up a new wallet and testing protocols out. In that spirit, today I’m going to offer you 3 different Polkadot trading strategies...

Our industry loves narratives, I’m not sure why. Over many years in many markets, I’ve come to the conclusion that people love narratives as without them you need to face facts with the random walk theory of financial markets.\*\* A stomach-churning proposition for any market participant. For...

It’s a dangerous game being a main character in crypto. One that inflates egos, infuriates communities, and puts a large target on your chest. We’ve seen this play out during almost every crypto cycle: a new player enters the game, finds wealth and power in the industry, grows overconfident, then...

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Are you from Ireland ?
Do you like DOT  ?

Well then come on down, to roy's brown town for the lowest mattress bargins in town !