Cakepie Twitter Spaces with DefiEdge

In this episode of Cakepie Twitter Space on April 24, 2024, Lew from Magpie Ecosystem and Airboom from DefiEdge discussed the collaboration between Cakepie and DefiEdge to optimize liquidity and yield strategies on PancakeSwap. They discuss the technicalities of DeFi asset management, the importance of vote managers, liquidity lockers, and the role of decentralized governance in improving protocol interaction. Read our notes below to learn more!

Background

Lew (Host) – AMA Lead on Magpie Ecosystem

Airboom (Guest) – Contributor at DefiEdge

Cakepie – a state-of-the-art SubDAO by Magpie to bolster the long-term sustainability of PancakeSwap

Magpie – an ecosystem of DeFi protocols that provide yield and veTokenomics boosting services across multiple blockchain networks

DefiEdge – a solution provider to deploy liquidity and optimize yields on Concentrated DEXs

Securing DeFi Assets

Airboom introduces himself as Airboom from DefiEdge, with a background in ML and blockchain, discussing his experience with Uniswap v3 and the shift from Uniswap v2 to more controlled asset management strategies.
Lew asks if DefiEdge was created to solve asset management issues related to contract vulnerabilities, suggesting that this was implied in their white paper.
Airboom says that their whitepaper might be misinterpreted, explaining that they build on a permissionless architecture with security features like Chainlink protection to address vulnerabilities, not directly because of underlying contract exploits.
Airboom discusses the role of vote managers and liquidity lockers in DeFi, highlighting their importance in managing community-driven governance and reward distribution.
He explains how liquidity lockers work as a mechanism for community governance, similar to voting in governmental elections, and describes the process of voting for reward distribution in DeFi protocols.
Airboom praises Cakepie’s implementation of a flexible voting and rewards system, mentioning how it integrates with its governance structure to enhance community participation and protocol interaction.

Optimizing DeFi Strategies

Lew says that they utilize their $mCAKE (Magpie Cake) and increase their $veCAKE treasury on PancakeSwap, controlling over 38% of the total voting power.
Lew adds that this control allows for significant cake emissions, which benefits users and $CKP (governance and revenue-sharing token of Cakepie) holders through governance power and potential bribes from ecosystem partners, with over $300,000 received in bribe rewards.
Airboom confirms their participation in the Arbitrum vaults on Pancake Swap, appreciating the rewards and mentioning they were the first listed on the PancakeSwap vault.
Airboom explains that DeFi markets operate continuously, unlike traditional finance, and require constant trading in each pool to set prices, making it complex for retail users to manage.
Airboom describes the susceptibility of DeFi pools to flash loans and price manipulations, detailing how price changes affect liquidity and can lead to impermanent loss, making it challenging for retail users to understand.
Airboom highlights the advantages of using a quant team for position management, leveraging volatility indicators, and futures and options data to optimize trading strategies.
They also discuss the use of DefiEdge for fund management, ensuring legal compliance, and offering protections such as swap protection and limited orders, which are not typically available to retail users.
Airboom says that DefiEdge simplifies the process for retail users, allowing them to make more money efficiently, even while sleeping, by relying on automated bots and professional management, despite the fees involved.

Empowering Users in DeFi

Lew discusses the importance of efficient position management in DeFi, mentioning that users desire automated systems to manage positions and earn while sleeping. He refers to Airboom’s use of contracts and human or automated position managers.
Airboom says that DefiEdge’s system primarily utilizes automated liquidity systems managed by bots, with the option for users to manage positions. This system operates around the clock.
Lew asks about the criteria and permissions for managing funds on DefiEdge. He is particularly interested in how users can invest under his management.
Airboom explains that while their contracts are permissionless, allowing anyone to create strategies and attract investments, they maintain a selective listing process on their UI. To be publicly listed on their dashboard, a user must pass a KYC process that verifies their credentials.
Lew agrees that the risk of investment lies with the users who choose to invest under a specific manager.
Airboom talks about the community’s role in deciding which pools receive emissions, enhancing engagement and efficiency in the system.
Airboom elaborates on the community-driven aspects of DefiEdge, highlighting that liquidity providers have more say in the distribution of rewards, which helps in creating a more sustainable and participatory ecosystem.

Enhancing Efficiency in DeFi

Lew mentions that Cakepie provides high efficiency for its users, giving an example where investing $1,000 worth of bribe might yield $1,200 in $CAKE emissions, effectively saving users $200.
Lew says that this efficiency benefits the overall ecosystem, as Cakepie encourages users to convert their cake tokens into $mCAKE, locking them as $veCAKE forever, which helps accumulate voting power and boost APRs.
Lew highlights that Cakepie offers flexibility, allowing users to swap $mCAKE for cake tokens anytime, which enhances their earning potential by staking $mCAKE.
Airboom explains their collaboration with PancakeSwap, emphasizing their role in managing bribes and voting mechanisms that support liquidity and ecosystem growth.
Airboom discusses the importance of position managers in maintaining pool efficiency, noting that effective management helps maximize revenue from fees and mitigates losses.
Airboom talks about the synergistic relationship between Cakepie and PancakeSwap, pointing out that their management helps ensure more predictable revenue from pool fees.

Exploring Innovations in DeFi

Lew asks Airboom about the roadmap for DefiEdge and its plans to enhance the Pancake Swap ecosystem, especially on Arbitrum.
Airboom mentions they are working on single-sided liquidity solutions, already available but soon to be actively rolled out, allowing users to deposit $BTC in a specific pool and manage their assets with various options.
He highlights upcoming innovations to be featured on PancakeSwap and mentions the introduction of hooks as part of their V4 mechanisms, which are currently in development for launch next quarter.
Airboom discusses integrating more data sources for predictions, including futures and options, to enhance their quantitative strategies, which already consider volatility factors.
They plan to offer users different investment options based on their risk preferences, with both single-sided and multi-sided liquidity options soon.
Expansion to more blockchain networks is planned, aiming to test theories and partnerships, with upcoming appearances on Linea and Manta among others.
Lew appreciates the updates, particularly the one-sided liquidity options for PancakeSwap users, which minimize exposure to volatility from a second asset.
Airboom explains the benefits of their Automated Liquidity Optimization (ALO) system, addressing market volatility and impermanent loss through sophisticated mathematical strategies and integrated swap aggregators for better asset management.

Navigating Impermanent Loss and Market Volatility in DeFi

Airboom talks about the concept of impermanent loss, explaining that when markets crash, the most common tokens follow the trends set by leading cryptocurrencies like $BTC and $ETH. He notes that impermanent loss occurs when the market is predominantly in one direction.
Airboom details that impermanent loss means if you hold a token and its price doubles, you should theoretically double your investment. However, in practice, tokens are sold at various prices, leading to reduced accumulated profit.
He elaborates that even if the price returns to the original level after an increase, traders can still make money from swaps and emission fees, describing this as the benefit of maintaining the position despite price fluctuations.
Airboom discusses market volatility and how it impacts decisions on positioning in DEXs. He suggests that traders need to consider the volatility and direction of market movements when setting up their positions.
He proposes that instead of a single investment range, a position could be divided into several ranges to optimize potential gains. This involves distributing investments across broad, semi-broad, and narrow ranges to manage risks and rewards effectively.
Airboom explains the role of position managers in managing the complexity of these strategies, ensuring that trades are executed within the predefined ranges to protect against market volatility.

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Show Information

Medium: Twitter (Audio)
Show: Cakepie Twitter Space
Show Title: Cakepie x DefiEdge
Show Date: April 24, 2024