Mika Honkasalo

Uniswap: information, guesses, and thoughts about v3

Uniswap is the most used decentralized exchange, with a 55% trade volume market share and approximately 10x the number of users (measured by addresses) compared to any competing protocol. Source: Dune Analytics For the first time, Uniswap’s weekly moving average for trade volume passed $1 billion. The protocol’s next upgrade (v3) is a long-awaited one […]
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Feb 23, 2021, 5:37PM UTC

A look at price risk-free yield strategies

Bitcoin’s price has continuously risen for the past six months. On October 1st, BTC was at ~$10,600 to over $51,000 today — a 380% increase. As a product of this run, the demand for stablecoin-denominated debt for leverage has increased appreciably. For stablecoins (or constructions of synthetic USD positions), the yields are extraordinarily high compared […]
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Feb 17, 2021, 11:32AM UTC

An Overview of Synthetic Assets on Mirror Protocol

Synthetic asset protocol design DeFi protocols for issuing and trading synthetic assets can be built in various ways — each with its own set of tradeoffs and strengths — but the big questions that have to be answered are: By what mechanism does the price of the synthetic asset track the price of the underlying […]
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Feb 10, 2021, 11:06AM UTC

Cosmos IBC and the argument for application-specific chains

Flavors of interoperability It makes some intuitive sense that blockchain interoperability should be a useful technology — after all, today, there are many different blockchains (with varying levels of use) that don’t communicate with each other. It’s easy to imagine a future for blockchains where multiple different networks are isolated from each other in some […]
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Feb 8, 2021, 10:49AM UTC

Futureswap: an AMM for perpetual swaps

For a detailed overview on perpetual swaps and the market opportunity in decentralized finance, see this research piece on Perpetual Protocol. Ever since BitMEX launched perpetual futures in 2016, perpetual swaps have been a massive hit in crypto. Unlike traditional futures contracts, perpetual swaps don’t have an expiry date, which has made them easier to […]
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Jan 27, 2021, 12:23PM UTC

Upcoming EIPs and the Ethereum 1.0 roadmap

History of Ethereum forks Ethereum has gone through a series of changes instituted via hard forks since its launch in July 2015. These network upgrades are intended to improve scalability, user experience, and security — and are described by Ethereum Improvement Proposals (EIPs). Since there’s no central authority that makes decisions, there’s a rough consensus […]
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Jan 25, 2021, 12:31PM UTC

Reflex indexes for more stable collateral assets in DeFi

Despite the success of stablecoins, with a total supply of $32.8 billion today — up from $5.8 billion a year ago — the market is still searching for trust-minimized and scalable solutions. To date, DAI, the most successful “decentralized” stablecoin, has a total supply of $1.3 billion while USDT is at $24.3 billion, and USDC […]
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Jan 13, 2021, 11:47AM UTC

Recent DEX metrics and 2021 themes

In November, it looked like the story for DEXs was one of a bubble that had popped and a significant downturn in volumes that followed. After Compound’s liquidity mining incentives — where users were rewarded COMP for borrowing and lending using the protocol — a wave of interest kicked off in decentralized finance driven by […]
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Jan 11, 2021, 12:09PM UTC

How to build a stablecoin protocol from funding rate arbitrage

Stablecoins are a use case in blockchain that has reached a level of product-market fit. The total supply of stablecoins is now $27.3 billion — up 362% year-over-year. Despite this success, there are some question marks with the long-term viability of current stablecoins. There may also be successful stablecoin constructions in the future that are […]
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Dec 30, 2020, 11:30AM UTC

Perpetual Protocol: Liquidity for DeFi Perpetual Swaps

Perpetual Protocol is a DeFi project focused on perpetual swaps. The project launched the first version of its mainnet on December 14th. In August, Perpetual Protocol raised a $1.8 million round led by Multicoin Capital, with participation from Three Arrows Capital, CMS Holding, and Alameda Research. Perpetual swap basics and market opportunity A perpetual swap […]
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Dec 28, 2020, 5:17PM UTC

Analysis of “Seigniorage Shares” Algorithmic Stablecoins

Stablecoins have clearly reached a level of product-market fit. The total supply has grown from $5.9 billion at the start of 2020 to $26.1 billion today. This represents a 344% increase. Moreover, stablecoins have become the default means-of-exchange in various DeFi applications, such as prediction markets. Today, most of the market is dominated by the […]
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Dec 17, 2020, 11:30AM UTC

Decentralized Protocols and Mergers

Yearn.Finance, a yield and lending aggregator in DeFi, has recently announced a series of “mergers” with other DeFi protocols — namely Pickle.Finance, Cover, Akropolis, and Cream. This has brought to attention the idea of DeFi protocols making M&A transactions. Additionally, yield aggregator Rari Capital will move their liquidity to the asset management protocol Melon — […]
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Dec 10, 2020, 12:00PM UTC

A proposal: Do nothing with Uniswap's liquidity incentives

To recap: Uniswap’s initial liquidity mining rewards ran from September 18th to November 17th. 20 million UNI were distributed to liquidity providers for four trading pairs (5 million UNI each) — ETH/USDT, ETH/USDC, ETH/DAI, and ETH/WBTC. At the current UNI price, the distributed amount is worth about $70 million. To put this in perspective, 20 […]
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Dec 1, 2020, 5:36PM UTC

Nodes, Clients, dApps, and centralization risks

On November 11th, parts of the Ethereum ecosystem experienced downtime due to the node provider Infura experiencing a service outage and accidentally hard forking to a minority chain for 30 blocks. This led to crypto exchanges, such as Binance, halting deposits, and many decentralized applications (dApps) built on Ethereum being unresponsive or corrupted. For example, […]
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Nov 25, 2020, 12:00PM UTC

Analysis of Prediction Market Odds on Election Night

Record trade volumes The 2020 election was an exciting time for anyone interested in prediction markets. After years of only trivial amounts of activity — and failing to have a similar breakout to other decentralized services such as lending, exchange, and stablecoins — blockchain-based prediction markets saw significant trade volumes during the presidential election. Polymarket’s […]
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Nov 10, 2020, 4:06PM UTC

October DeFi Charts: The Block's DeFi Index and 2020 Election Markets

What is The Block’s DeFi index? The Block’s DeFi index is the list of protocols that are used in our price-performance charts on the data dashboard. The current list includes 13 protocols: Aave (AAVE), Augur (REP), Balancer (BAL), Compound (COMP), Kyber Network (KNC), Loopring (LRC), MakerDAO (MKR), Nexus Mutual (NXM), Ren Protocol (REN), Synthetix (SNX), […]
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Nov 3, 2020, 6:24PM UTC

Introduction to the Yield Protocol

Besides decentralized exchanges, decentralized lending is the other category of DeFi service that has taken off recently. Indeed, three of the five top DeFi protocols by total value locked being lending protocols. MakerDAO, Aave, and Compound have a combined total of $2.4 billion in outstanding debt. The success of lending protocols is largely dependent on […]
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Oct 27, 2020, 9:51PM UTC