The Optimist Twitter Spaces with Sami from Redacted Cartel

In The Optimist’s Twitter Spaces which took place on February 2, 2024, Subli hosted Sami to discuss Redacted’s strategic evolution, liquidity infrastructure, utility-driven DeFi projects, Berachain, and more! Read our notes below to learn more.

Background

Subli (Host) – Founder of The Optimist

Sami (Guest) – Co-founder of Redacted Cartel

Redacted’s Unique Trading Strategies

Sammy explains his background in crypto, including his time at Sushi and as a Research Analyst at Messari, and the founding of Redacted to build liquidity infrastructure.
Sammy explains the essence of successful DeFi projects offering unique trades that others can’t, mentioning Redacted‘s approach through projects like Hiddenhand and Pirex, and the latest endeavor, Dinero, aimed at creating a utility-driven stablecoin.
Sami clarifies the focus is on Redacted Cartel as a project across any chain, highlighting that successful crypto projects offer unique trades that others cannot. Examples include Aave‘s debt against tokens, Uniswap‘s permissionless liquidity, Curve‘s efficient stable swaps, and GMX‘s leveraging of trading skills through GLP.
Sami positions Redacted, through initiatives like Hidden Hand and Pirex, as exploiting niche inefficiencies to offer unique trades, aiming to dominate a smaller market segment fully rather than owning a small part of a larger market.
Subli asks about the significance of Redacted’s early model shift and its benefits, noting Redacted’s start in late 2021 as an Olympus fork.
Sami explains that the initial launch model was a hyper-bootstrapping phase, essential for funding the treasury to scale future projects like Pirex, and Dinero, influence governance for Hidden Hand markets, and bootstrap Pirex vaults. This phase was critical for ensuring the project’s longevity and funding, contrasting with many projects that failed due to a lack of financial planning.
Sami highlights the importance of having a long-term financial runway, which for Redacted, is estimated to be eight to ten years, thanks to the treasury assets accumulated during the initial phase. This strategy has positioned Redacted to pursue its goals effectively in the current crypto and DeFi resurgence.

Accumulating Governance Tokens for Liquidity and Utility: The $CVX Strategy

Subli highlights that according to their treasury, they accumulated a significant amount of governance tokens, notably 1.4 million $CVX tokens from Convex Finance.
Sami says they hold much more than that, with a substantial amount of $CVX in Pirex, and mentions the TVL in Pirex is around 3 to 4 million $CVX, making them the largest holder of $CVX.
Subli notes that they use these $CVX tokens to attract liquidity to their various solutions or tokens, emphasizing that managing liquidity was seen as a challenging task at the start of their project.
The strategy was to accumulate governance tokens to ensure they could attract liquidity without additional cost upon launching new projects like Dinero or future stablecoin.
Sami says that while liquidity attraction is an advantage, it is not their main edge. He points out that liquidity can only take a project so far before it hits a ceiling where further growth requires actual utility beyond token farming.
He compares their strategy to overcoming the limitations faced by other projects, by providing actual use cases for their stablecoin in various countries and across different blockchain layers, enhancing transaction efficiency and execution beyond mere yield generation or liquidity attraction. He stresses the importance of offering a utility trap, not just a liquidity trap, to draw users into their protocol.
Subli asks about using the $DINERO stablecoin for gas payments across different chains through Redacted’s RPC, to which Sami confirms and elaborates on the limitations and possibilities based on the chain’s infrastructure.
Sami mentions Redacted’s roadmap, focusing on building a reserve of validators and liquid staked derivatives (LSDs) in the first half of the year to support stablecoin transactions. The plan includes deploying the full treasury, going multi-chain, incentivizing liquidity pools, and eventually minting the stablecoin against deep liquidity pools.

Strategies for Cross-Chain Governance and Liquidity

Subli asks about utilizing existing governance power on specific chains and the strategy for deploying “full treasury weapons” on other chains, pondering whether to incentivize through schemes like voting incentives or accumulate governance tokens on other decentralized exchanges due to a long-term vision.
Sami explains that their current position allows them to achieve similar outcomes without direct accumulation, by leveraging their comprehensive product suite and asset reserves developed over two years. They aim to facilitate liquidity on various chains, such as Binance Smart Chain (BSC), without financial expenditure through partnerships and solutions like Marionette, which simplifies the bribing process for users via Hidden Hand.
Sami highlights the complexity of planning liquidity strategies on each chain, considering existing exposure and partnerships, indicating that acquiring governance power through fees is a long-term, nuanced process.
Sami notes that some Layer-2 networks have provided financial incentives to support liquidity for their project’s token, recognizing its utility in offering higher yields and aiding in network decentralization.
Sami says that their project’s higher yield results from a dual-token system involving $pxETH and $apxETH, with the latter accumulating all staking rewards. This system, coupled with incentives for $pxETH liquidity and yield farming across various chains, allows for significantly higher yields for $apxETH holders by abstracting away from DeFi yields.
Subli understands that the goal of building deep liquidity for $pxETH, through governance and incentivization strategies, ensures that $apxETH holders can access superior yields, benefiting both types of users within their ecosystem.
Subli inquires about the timeline for seeding liquidity for $pxETH on Optimism and Base, seeking a general rather than specific schedule.
Sami mentions that for Optimism, the plan is to enable bridging and native minting of $pxETH on the chain through a partnership with Chainlink’s CCIP within the next week. They intend to direct incentives towards $pxETH liquidity providers using their $VELO vote.
Sami mentions that for Base, the timeline is closely following Optimism’s, albeit with the final Dex selection still pending. They aim to implement a similar incentive scheme similar to that used in Optimism.
Sami explains Mode will involve staking the entirety of Ethereum (minus a reserve for liquidity) into $pxETH, allowing the entire chain to earn $pxETH yield. This yield will be distributed to users via their mechanism, with plans to also bridge $pxETH to support the ecosystem.

Optimizing TVL: Liquidity Strategies for Chains

Subli comments on the significant opportunity presented by potentially large TVL on chains like Mode, which could see a substantial portion of Ethereum staked in $pxETH.
Sami says that not every single unit of Ethereum will be staked in $pxETH due to the necessity of maintaining a reserve for liquidity to satisfy redemptions.
Sami reveals efforts towards creating a framework in collaboration with Redacted and possibly Mode, which would enable any Optimism chain to stake Ethereum into $pxETH. This framework aims to be audited and battle-tested, facilitating broader adoption across Optimism chains.
Sami discusses the strategy for L2 chains to maintain liquidity for redemptions by replicating the reserve model used by Dinero, allowing for a shared state of liquidity across all participating chains, and enhancing competitiveness.
Sami says that Mode’s interest lies in achieving the highest yield in the market, scalable yield, and access to meta transactions exclusive to their LSD solution, with $pxETH being the evident choice.
Despite being unable to join discussions with Manta and Blast initially due to their service not being live, Sami believes their framework, now among the top OP chains, will attract integration without compromising security or liquidity, benefiting from increased TVL while offering higher yields and decentralization assistance via meta transactions.
Sami mentions prerequisites for issuing their stablecoin, including the activation of the Chainlink Oracle, sufficient liquidity for $apxETH, $ETH, and $pxETH for LPs, favorable market conditions for offering debt, and further development of the reserve model. The immediate goal is to elevate pxETH’s valuation to a billion, focusing on execution with the existing technology and infrastructure.
Sami says that integration with the EigenLayer is planned, with a vote expected in the next few months to include $pxETH. Post-integration, they intend to collaborate with Renzo, Rio, and LRTs, highlighting that $pxETH will remain an LST, offering staking through LRT partners without adding risk for those averse to it.
Sami explains that liquidity restaking, offering a reserve of liquid-staked ETH for all chains, provides more value than security staking. This approach allows chains to tap into the reserve for TVL bootstrapping without sacrificing sequencer fee revenues, positioning it as a more bullish concept than security staking.
Subli asks how liquidity restaking could aid a new L2 chain’s launch within the superchain framework, asking for a use case to better understand the process.
Sami, explains the pending proposal finalization and sketches a scenario where Mode’s bridge accumulates significant capital staked in $pxETH, yielding high returns. This model could be extended to facilitate liquidity sharing across bridges of various stack chains, enhancing yield access and liquid reserve for withdrawals, and illustrating a collaborative liquidity management strategy.

Redacted’s Flexible Blockchain Strategy & Yield Opportunities

Subli asks if a product could exist as a layer on another chain where all liquidity stays and people plug on top of it. Sami mentions they haven’t considered the semantics yet.
Sami explains that Mode is currently live, allowing bridging over $ETH, which is not yet staked in $pxETH as part of phase two, where bridged $ETH will start earning yield for LSDs with Ethena for stablecoins. He encourages creating referral links and mentions the developing ecosystem incentivized by $pxETH and neutrality across all operational chains.
Sami says that every product by Redacted includes a fee share benefiting $BTRFLY Token Lockers as an incentive for governance participation, covering various revenue-generating activities within the Redacted ecosystem.
Sami shares his connection to the Berachain team as childhood friends, explaining his advisory role rather than direct involvement in building Bearchain, and highlights the project’s potential and relevance for Redacted.
Sami explains plans for Redacted’s presence on Bearchain, including the porting of all its Ethereum products and the strategic approach to be versatile and responsive to market dynamics, without favoring any specific blockchain.
Sami highlights the importance of not overly committing to a single blockchain, as the landscape can rapidly change, potentially leaving projects that are too closely tied to one blockchain at a disadvantage.
Sami says that Redacted does not favor specific blockchains but instead focuses on where their product can make a significant impact, mentioning past initiatives with Mode and Aura before they were widely recognized.
Sami says that they are not about chasing popular trends but seek to make meaningful contributions to ecosystems, taking opportunities to implement their technology where it can generate revenue, without the need for high-conviction investments.
Sami reveals their ambitious roadmap for the coming year, aiming for significant growth in their projects without committing to a multi-year plan, highlighting adaptability and focus on current opportunities.
Sami highlights the unique yield opportunities and integrations $pxETH offers, positioning it as an attractive option for both simple and complex investment strategies, with a nod to the excitement generated by their billion-dollar goals.

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Show Information

Medium: Twitter (Audio)
Show: The Optimist Twitter Space
Show Title: 🦋Redacted Cartel <> The Optimist
Show Date: February 2, 2024