Yeah, for those of you that couldn't join, Simon just jumped off literally like 2 minutes ago on a Twitter space with our lunch, which was super interesting actually.

I think so far as in the, I can see as well, Nice.

I think the guy hosting might have lost signal right at the end.

So, yeah, thank you everybody for joining to our regular Town Hall happening every first Thursday of each month.

A year ago today, Volt's protocol launched.

I think the space changed a lot since, was it around that time last year?

Well, 12 months ago, Just over 12 months ago, Luna crashed.

Just think about how much the whole space has changed since then.

So, hopefully the conversation is not about Luna today, but we do have a lot of interesting stuff to talk about.

And we also have Alex on the stage that will walk us through how Vault brought software rates to Onchain, which is 1 of the exciting things we deployed this month.

But we also have Arthur, Yuan, and Simon on stage today.

And yeah, so Simon, do you want to take it off comparing where we were previous month, where we are now?

There's quite over the past month has been a lot of craziness in DeFi.

We've had obviously all the meme coins trading which happened and obviously for a period that meant gas prices were just insane.

But I guess from a vault's perspective, there's been quite a lot of trading, particularly in recent weeks.

And there's obviously been new markets have been launched, which we're going to be talking about.

And then alongside that, there's the kind of steady ramp up towards Vaults V2 going live, which is why there's that kind of ongoing voyage initiative, which I think we're going to talk about as well.

So just a ton of stuff going on, which is, I don't know, I'm excited.

This next month is going to be a pretty exciting month for Vault.

As if the current ones weren't already pretty exciting.

But yeah, V2 is very, very close, like getting closer as we speak.

And some other stuff happened as well, so as we said we have software 8 on our lens now.

Yeah, I mean we have Alex joined today and it is something that it is pretty exciting so maybe Alex you want to jump in and maybe you Arthur as well if you want to like explain what is SOFA and like yeah how we made it happen, basically.

Sure, maybe I can just talk briefly about Sofware and then hand over to Alex to go deeper into the implementation and how we managed to practically get it live.

So maybe as some background on the software market, It's the first non-DeFi native market that Vault Protocol has launched.

And 1 of the major differences between this launch and the previous ones is that Now we're actually getting the rates from an off-chain source, which is the Federal Reserve API, which is served by

And I think in terms of the practical differences, that's kind of 1 of them.

But in terms of the actual way that this rate is derived, it's very, very different from what we have seen in DeFi.

So SOFR is the Secured Overnight Financing Rate, which is published every day by the Federal Reserve of New York.

And it's effectively the US version, I would say, of SONIA, which is a measure that aggregates a range of transactions that have been done by financial institutions that used USD, the denominated treasury securities, as collateral to borrow overnight cash.

These transactions tend to be aggregated and averaged to produce a rate which can then be kind of treated as a benchmark borrowing rate and referenced in a range of derivatives beyond just the kind of vanilla interest rate swaps.

That's I guess some background on software and 1 of The most interesting things about this market, at least for me personally, is that it's a lot more attached to what's happening in the real world, meaning that the research and analysis published outside of the DeFi bubble is still applicable and can be used to make trading decisions both from the speculative lens, but also when it comes to hedging, volatility coming from various different decisions stemming from the Fed and just overall kind of market activity.

So I guess, yeah, that's a kind of high level overview.

I guess it would be quite nice if Alex talks through how it was actually implemented.

I can jump in, I guess, on the implementation details.

So, I guess, like to start from the beginning, as Arthur mentioned, I guess the software rates are computed and published by the New York Federal Reserve every business day.

And once those are published, the rates are immediately picked up by Redstone, which is the Oracle partner.

And they will publish the values on chain.

And then this will allow the vault smart contracts to read the most up-to-date rates.

And now I guess when talking about the actual implementation in the Vault smart contracts, the software pools follow the same structure as the other pools to be honest and yeah this means that there was a custom rhetorical that was built for software but yeah everything else stayed the same and I guess this shows that yeah, the protocol is generalizable and yeah is able to handle in this case trade 5 markets pretty straightforward as well But yeah, of course, there were a few differences when building this custom rate oracle in the vault smart contracts, especially in the way the New York Federal Reserve computes APIs.

So for example, rates are not compounded continuously over time as in the case of Aave for example, but rather like every business day.

Another example would be that they use like a 360 day a year when computing APIs rather than a

So there were a few differences, but overall, these differences were small.

And yeah, I guess this just shows how general is the protocol.

And yeah, I think to be honest, that would be it in terms of the implementation details.

Maybe just to top on this as well, maybe you, Arthur, Simon want to double down and why is this a big deal?

Yeah, no, I mean, I think I kind of alluded to it that I think it's a huge deal when we start thinking about just the underlying TVL of the software markets and the volumes that we see.

In the TriadFi world, it's in the range of quadrillions, which is a huge number that's hasn't like, yeah, it kind of dwarfs everything we have seen so far in DeFi.

And we kind of see it as a bridge that enables us to take a market that's already well established outside of DeFi and use it as a stepping stone that would prove the power of the technology in kind of serving a need and serving a market that already exists in a way that's different from how it's been done traditionally.

And I see it as a very exciting experiment and just 1 of the first, 1 of the many steps towards unlocking the potential of the technology we are building.

I think It's very exciting to have been able to experiment with Aave and Lido, Rocket and other markets.

1 of the main limitations of these markets is the fact that the TVL limits the ability of the markets to, of the derivative markets on top of this underlyings to grow continuously because of the kind of risk of Oracle manipulation attacks.

It's much easier to manipulate rates that are based on a TVL in the millions and even single figure billions.

But when we look at the repo markets that the software rates are kind of derived from, they're a lot less manipulatable and they have a lot more room for growth and validation of the technology.

And I think that's 1 of the many things that I personally find very exciting about this market.

Yeah, I think to add to that, I kind of view it broadly in 2 kind of like buckets.

I think on 1 side, this is a market that everybody's exposed to, but has previously only been accessible to a small handful of institutions in traditional finance.

And to open up that market in a permissionless way such that anybody in the world can hedge or anybody where Vaults Protocol is accessible, it enables them to either hedge exposure that they might have what do you want to speculate on the decisions that may be made in the future and the directions in which those rates might move.

I said open up what is like frankly what kind of the biggest I think if not the biggest 1 of the biggest markets in the whole of the world to everybody, that is obviously an exciting step on its own.

I think the kind of like second big bucket, which is kind of what Arthur was talking to as well, is, you know, the long term kind of objective really has got to be to kind of move the entire global financial market onto blockchain rails for a whole bunch of reasons, not least of all the capital efficiency that that would unlock the entire world.

In order to do that, we obviously have to take these smaller baby steps, which actually as steps in their own arguably are not that kind of baby they're actually pretty big steps and this is in my mind they can have 1 of those kind of steps that we need to take as an ecosystem, but we're really bringing down the barriers between DeFi and TradFi and actually opening up a market that previously existed in traditional finance but replicating that on blockchain-based rails such that people can come in and start trading that same market but on new infrastructure.

And obviously over time as we do that more and more that ultimately enables us to get to this much bigger long-term objective of having all global markets exist on blockchain-based rails?

Usually we do like Q&A at the end, but since we're talking about software we had an interesting question about, not generic, but more like 1 of our pools and related to the margin.

The discussion went on yesterday already, but maybe it would be good to talk about what are the margin requirements of that pool specifically and why is that set that way and if we're gonna do anything about it since I have Alex on the stage as well.

Maybe you Arthur or Simon also want to chip in.

Yeah, Alex, do you want to talk to kind of the way in which the risk parameters are calculated in the first instance and then I can kind of talk to what we're going

Yeah, so I guess when configuring a given pool, there's this risk engine which will compute all of these different risk parameters that will feed into the pool.

So these parameters are used to compute margin requirements, for example, when a new trade would happen, and also throughout the position until maturity.

And I guess in the case of the software pool, which expires in December, so that's a longer pool.

So I think it's like 7, 8, or like, yeah, 7 months, right?

So the risk engine requires fast data of at least the length of the pull, right?

So if we look like 8 months ago, the software rates were as low as

And I guess this influenced the risk engine to come up with some more conservative risk parameters.

And yeah, I guess this is also why the Ducato community raised this yesterday, the fact that the margin requirements are maybe a bit too high for that pool given the situation and the current software rates.

Yeah, and just maybe to build on that, I guess there's the way in which the risk engine has worked for markets that existed on false protocol so far, and that's worked really well.

So that's kind of like the methodology that has been used and applied, as Alex just talked through, to this SOFR market.

I think it's a pretty legitimate challenge that just given rates have moved so much, or the SOFR rate has moved so much over the past several months, that has contributed to higher margin requirements by using that same methodology.

And it's certainly something which we're looking at, whether or not that methodology is actually representative of the type of exposure and risk that could exist in the system through the kind of terms of these pools I think it's pretty reasonable to say that it's probably over cautious.

So we're just going to spend some time looking at it kind of through the rest of this week and early next week to try and make that a little bit more representative of the risk which like should in turn increase the leverage available for traders.

Hopefully this is a We answered your question, but yeah, feel free to follow up It's definitely something as we always say we like to hear from you all And this is very helpful.

Thank you Alex and Simon as well for jumping in.

Should we change topics a little bit and talk about something that actually happened yesterday?

This is not necessarily helpful but it's just been such a busy week.

There's an announcement that we will make sure we do in the future is just always announcing exactly what has changed at the point that new pools are launched or pools are potentially expired.

And yes, there was quite a big rollover because pretty much every pool on the protocol matured except for the safer pools.

And if you go to the markets now, what you'll see is there's kind of like a reduction of the markets that exist solely on Ethereum just given gas prices that can be pretty high at times and instead we've tried to boost the markets that exist on Arbitrum instead.

And then alongside that there are just a couple of things that did change.

So both the DAI and USDT pools were kind of essentially retired just for the time being.

Just given there's been quite a lot of trading on the USDC markets, actually the decision that was made was to launch more of those markets instead.

Clearly the markets exist for people that use the protocols.

If there is a lot of feedback that people want, for example, the USDT market to come back, that can be enabled pretty easily.

The other thing that happened is GLP markets, if you think about the fees that LPs collect, that should be representative of the risk.

The other way of saying that is if the pool is extremely volatile, then arguably the fees should be higher.

It's 1 of the things that probably got overlooked at the point that GLP was first launched.

But now looking back on the data, you can really see that LPs, whilst there are LPs that have been generating money, it is kind of reasonable for that fee to be higher.

So that got increased from 10 bps to 50 bps.

bps, with Sofa being 2 bps for the LP fees.

And then the final thing that happened, so there were the R-Eth and ST-Eth pools that existed.

There has been some trading on that recently.

1 of the things that we're actually pretty excited about and keen to get kind of community feedback on this is there are some new rates that are being created where they aggregate the returns across every validator that exists on Ethereum rather than just a subset of validators which exist with LIDAR or with Rocket.

So what we've been looking at, and again keen to get feedback from the community on this, is instead of launching a LIDAR and Rocket pool, actually launching a whole of market pool, which can become a really interesting rate for people to either arbitrage relative to LIDAR and Rocket, or actually start to use as a kind of reference rate because it's kind of representative of like your risk-free rate that exists in Ethereum.

So they're the main changes is just to kind of recap more pools on Avalanche, sorry Arbitrum, kind of increasing GLP fee and then Areth and Esteth pools have been like retired just whilst we kind of continue to explore this whole of market, state, kind of rate.

But yeah, you probably noticed those changes.

That also means that if you had positions on those retired pools, you won't be able to roll them over.

You can only settle your positions at this point.

Same will happen with your optimizers, if you had any on those.

But yeah, feel free to spend more time on Arbitrum if that's what you wish.

Definitely gas cost is way cheaper now that you guys trade in meme coins.

We've got like 2 more topics to talk about and not so much time left.

So Maybe we go into Voyage and then Volsby 2, is that right?

So Voyage, we have passed halfway or midway point for week 3.

If you have been completing the previous tasks for the previous 2 weeks, you will be able to see that on the Voyager space, which is just a special tab that you have on the app.

In general, we don't really disclose how to get those badges.

They are SVT based, but I don't wanna say too much, but there will be some interesting stuff happening at the end of the voyage, may or may not be related to SDTs.

But yeah there's a bunch of stuff that we've prepared for the end of the voyage and I do see like some continue asking like some hints on false voyage feel free to ask that in general channel and I bet there will be some people in the community that are willing to help you.

I'm surprised no one's worked it out yet though.

I'm sure they did but a bit of PvP maybe.

Cool, so that's Voyage, but obviously Voyage is leading to something that might or might not be Vaults V2.

Vaults V2 is getting closer and closer, maybe Simon you want to give a quick update?

Yeah I mean well so maybe just macro level obviously Voyage exists to like we put out in the blog post around this, to give early access to Vaults v2, where that is like a massive expansion of the capabilities of Vaults protocol, which I can talk to you to the extent that's helpful.

Maybe just briefly, or less, it doesn't even need to be briefly, Arte, I don't know if you want to talk to kind of like where we are at on the roadmap in terms of building out V2.

So from kind of V2 perspective, there's been a lot of work recently and kind of in very, very soon we're going to be pushing it out.

But just to zoom back, I kind of wanted to maybe walk through the high-level architecture and how is V2 going to look like in its end form and where we are at in terms of the roadmap towards getting towards that end form.

So the core idea, I guess, behind v2 is that it is a low-level primitive that effectively acts as a clearinghouse that enables the creation of margin accounts, where these margin accounts can effectively work across a range of different collateral assets and across a range of different take and maker positions initiated on top of the instruments that are registered and supported by the clearinghouse.

And that means that once there is the core, the clearinghouse, then as soon as you have instruments on top of that, you can then spin up exchanges, which could be in the form of an AMM, like we have had with Vault31, or it could be any other form of market making, primitive, which could be CLOB or a passive liquidity provisioning scheme.

And the end game of V2, I guess based on our current view, is that we have these pieces all aligned and ready to be used and to be integrated with by the teams that want to develop new derivative exchanges, pricing mechanics, as well as other market makers.

So in terms of where we are at in the journey towards the end game is we are now, we have deliberately split the execution of V2 into phases in order to make sure that we ship it in a secure, robust, and gradual iterative way with community feedback and in between releases.

And the initial release, which we call the MVP version of v2, is the 1 that we're getting towards the end of the shipping process, is going to be a trimmed down version of the full v2.

It will have support for the integration of instruments, however in the beginning it will only support the dated interest rate swap instrument, which has the same payoff mechanic and mechanism kind of as the interest rate swaps on v1, with the only exception that this new instrument is now fully integrated with the v2 rails.

And as the first exchange on the protocol, we'll be using a virtual automated market maker that has been adapted with some small changes to also work with the clearinghouse there.

That is the kind of the current state and where we are at the moment, but over time, over the coming month, there will be further iterations which will introduce cross-margining, a lot of, quite a big chunk of changes to liquidation mechanics, as well as kind of the introduction of the generalizable instrument and exchange layers that are going to be available for other teams to integrate.

And yeah, I think that's at a high level what the roadmap looks like, where we're at and where we want to go.

Well I think the only thing that I'd add is obviously well, so the kind of low level rails create the opportunity for other teams to come in and build on top of essentially a generalizable margin engine that will exist in DeFi for the first time.

And for makers and takers that might interact through that primitive, there's a ton of benefits, all which ultimately result in increases in capital efficiency.

And maybe just to explain that really briefly.

So the way that DeFi works today is that we've essentially had proliferation of trading venues, which on 1 hand is great because it's been a ton of innovation, on the other hand it's kind of a negative because it's created kind of like this fragmented market where as makers and takers, you have to post margin.

If you're trading across multiple venues, you have to post margin to multiple different exchanges, despite the fact that those positions on those different exchanges might be offsetting.

And what the V2 Rails enables is it enables this kind of at an abstract level, like a low-level operating system, like a financial operating system to exist on an EVM chain, which all of a sudden enables these different exchanges to be able to essentially talk to each other.

At a practical level what that means is it means instead of having 1 margin account per exchange you actually just have to have a single margin account that is able to interact with each exchange.

So if anybody's listening to this as a new DEX team or an existing DEX team and is keen to explore kind of how you could build on top of these kind of low-level rails that we're creating, then obviously please do reach out and yeah, we'd be keen to talk.

Yeah, you can open a ticket if you want, if you want a bit more privacy and you have access to the team.

And in terms of what we're working on, V2, it's not the only thing.

So you probably have noticed how every now and then we keep updating the UI with new functionalities or small changes in functionality and UX improvements and quality of life improvements etc.

There's a new screen coming very very soon.

I might be sharing some of that in a small subset that we have, which is for what we call the testers.

If you want to be part of that group, and you're an active Vault member, just reach out and we can talk about it.

So yeah, if you're in the testers group, soon you will see what is happening and what will be coming live very very shortly after.

We have a couple of interesting questions left that I want to go through.

So 1 is regarding LPs and the losses that they sometimes suffer due to trading support.

So have you considered adding incentives to improve the situation, such as giving liquidity providers another reward in addition to fees?

For example, rewarding them over time if the current rate is the winnings a set range, is within a set range.

Yeah it's kind of a really interesting question.

There's the first part which is LPs and how to generate profit as an LP.

And then there's the second part which is I guess around incentives for liquidity providers.

On the first part, honestly, we obviously do quite a lot of analysis on the data.

There's times, particularly recently, where we've seen LPs generate in excess of

APY on markets where they have deployed liquidity in a way that is both concentrated to kind of choosing the right tick ranges but also with sufficient leverage, which again contributes to their returns.

And when obviously the final thing is that there's quite a lot of trading volume in those markets, The other side of that is also true.

If someone chooses the wrong tick range, then they risk exposing themselves to losses.

So I guess when you're thinking about that question, the first part is it implies that everybody's not making money which is a hundred percent not the case and what we can have care about really helping LPs with is helping them Like understand how to make those decisions on what tick ranges they should be deploying liquidity within In order to generate profits rather than get locked into the wrong side of a swap and generate losses That's that's the predominant thing that we're focused on From an incentive perspective obviously volts like there is no volts token.

There's even when we had this SOFR announcement, there's a kind of like a news outlet that basically tagged a fake vaults token.

So therefore incentives from that perspective can't exist.

There are of course kind of badges that can be earned off providing liquidity in the right way.

But yeah, it's kind of without the token, there's obviously kind of no way to incentivize that side right now.

And thanks for reminding everybody that there's no token yet.

I see a couple of questions regarding tokens.

It is not our main focus, I would say, V2.

It's probably our main focus among other things.

There will be a token in the future, well, we'll see.

So, this just came in very fresh circle is natively launching usbc on our bit room on John The eighth how does folds handle this?

I don't know if anybody had time to check this 1 out.

I think it was just like a few minutes before the town hall.

I think I first heard it from the community, actually.

And yeah, I think it's not, I think it's expected that I think originally USC launched on Ethereum mainnet and then there has been a proliferation of alternative infrastructure layers, L2s and L1s, including Avalanche, that in the early days were just bridging to the platform of choice from Ethereum.

And that's kind of what has been historically done on Arbitrum as well.

So all the USDC that people are using on Arbitrum is just a bridged version of USDC from Ethereum mainnet.

But according to the recent news, it seems like Circle is expanding on their strategy to bring native USDC onto infrastructure layers beyond just mainnet and avalanche, but now also to arbitrum, which means that I think, yeah, in general, I'm quite happy with things like this, that given the risk of kind of bridge attacks and all the problems we have seen coming from those.

And I'm quite excited to see how this token would be adopted.

And I expect it would eventually start to displace the bridged version of USDC on Arbitrum, at which point my feeling is that the ecosystem will start switching towards that.

And from our perspective, it's nothing very difficult.

If the community feels like they want to switch over to the native USDC it will be quite easy to do with the rollover of new pools when the adoption starts to kick in

how is it going to be called Because I think the bridge 1 is already used this

Thing well avalanche there's like USDC dot e and there's native USDC Maybe on arbitrum there's gonna be the distinction like you see which is like the Ethereum version and then just native USDC.

But that's, yeah, that's very nice, I think.

Nice, thank you, thank you very much for that.

Any last minute questions, otherwise I will just thank everybody that joined the stage and all the questions that the audience asked, as usual, very, very useful.

And I've noticed Lopini is on the audience, which means I'm expecting a full summary of the call and a transcript.

Please send that to me and I'll share it with the community.

It's very useful if somebody wants to just read what we just said.

Cool, thank you very much everybody for joining today.

Thank you, Rana, Arthur and Simon and everybody else from the audience.

See all Voltz Labs transcripts on Youtube

Voltz Town Hall 01/06/2023