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BITCOIN SUMMER ft. VALENCE
Recorded: June 20, 2025 Duration: 1:00:28Space Recording
Short Summary
The Bitcoin Summer campaign is set to launch innovative yield strategies for Bitcoin, including MaxBTC and SuperVaults, in collaboration with major industry players. This initiative aims to unlock sustainable yield opportunities and enhance Bitcoin's role in DeFi, marking a significant evolution in the crypto landscape.
Full Transcription
Thank you. What is good, everybody?
We've got to get a few more speaker roles handed out.
I think this Bitcoin summer is in session.
You're on speaker right now.
I think Zion too.
Come to due time.
loving all the immediate support rory thank you for all the purple hearts just to start out the
space gotta love it All right, I think we have all of our speakers able, like up and invited.
We can do a mic check from everyone
while we do our introductions.
Hey, guys.
How you doing?
Can you hear me?
Yep, all good.
Cool.
Excited to be with you guys.
Been a while since I did a space.
Yeah, man. I don't think I've ever seen you in my time in Neutron. Hop on.
Got to bring out the big guns for the Bitcoin summer.
Got to get the chief marketer, bring in the's a big one yeah it's a fun one
what's up how you doing pretty good happy friday just chilling it's one of those mornings when you
wake up and you just can't get back to bed so i've been up like exorbitantly early and i'm like
exhausted so i apologize if i mumble or don't make any sense, but that's it.
Bitcoin Summer will do that to you.
It's a crazy time right now.
Don't blame me.
Yep.
Yep.
Haven't slept in weeks ever since I heard about Max BTC.
Can't close, man.
What's up, Jordan?
How you doing?
GM, GM, everyone. what's up jordan how you doing gm gm everyone over here at onion dow uh co-working and hacker house in chicago right now hope everyone's doing well did you say onion dow that's not a real place
oh yes yes has the weather broken 60 degrees yet in Chicago?
Broken as in below or above?
Consistently above, like day and night.
It's hot and humid.
Yeah, today, but I'm just saying in general.
Yeah, I'd say in general it's above 60.
But let me check the weather app again and I'll let you know.
Guys, I think we've got to get Max's speaker roll.
I think Haas is in here too.
I keep inviting Max, but it's not working. Maybe you can leave and
come back. That's me talking to him from Chicago.
We got him buggy. come back that's me talking about chicago
do we have do we have everyone up now yeah i think we're good yeah everybody hey ken how you doing
i'm doing very great i've been checking on my notification each time if seconds know when it's gonna hold life you know it's it was put at 2 p.m utc and nigeria here i thought it was
2 p.m aegean time until i check my utc so i need to go here just in my calendar they put it to 3 p.m., which is our time here. So, yeah, everybody, I almost left off.
I'm still here.
Well, nice to have you with us, man.
Glad you could join us.
All right, should we kick things off, Luffy?
Let's do it.
All right.
Yeah, so thanks, everybody, for coming by for our first Bitcoin Summer Space. We've got a bunch of guests up here today with us that we're excited to have talk to
us about Bitcoin Summer and everything that we have going on.
We just announced the Bitcoin Summer campaign, which you can see here at the top of the space
if you're
interested. You can also, if you're listening back to this, just check the pinned tweet on the Neutron
Twitter. At the top there, you have the blog post with all the information about the campaign itself,
including the partners, how the vaults will work, the campaign timeline, pretty much everything there. So, but yeah, Fluffy, do you want to, maybe I can give an overview of the campaign itself
and then we can kind of jump into things or how did you want to run things?
Yeah, that sounds great.
Okay, sure.
Yeah, so the Bitcoin Summer campaign, you know, I think if we take a step back and think about like, why did we decide to do this campaign?
And, you know, we've been working on this and coordinating the different partnerships for a few months now.
So a lot of work has went into this from our side.
And when you're taking such a big bet like this, I think it's important to think about, frame things in terms of why
are we doing this?
Why did the partners, why did these Bitcoin behemoths with multiple billions of dollars
of TVL agree to work with us on this campaign?
How does it benefit them?
and how does it benefit the Neutron ecosystem writ large?
And how does it benefit the Neutron ecosystem writ large?
So, you know, we think about, like, Neutron as a whole.
Really, the focus of Neutron is trying to realize the full potential of DeFi, right?
And, you know, what we've seen so far in the industry is that we've made some strides,
but I think, you know, we can all kind of agree that DeFi has failed to live up to its full potential up to this point.
And part of the reason for that is just due to the fact that we failed to unlock Bitcoin DeFi.
Bitcoin being the largest asset in the industry right now with over $2 trillion of market cap.
of market cap. And Bitcoin is kind of this first cryptocurrency to separate, you know,
with this mission of kind of like separating money from state and creating a more open and
efficient financial system for everyone to participate in, which is a core focus of our
team here and our ecosystem here at Neutron. So, you know, we've seen projects in the ecosystem,
like a lot of our partners in this campaign, start to pave the way of moving us closer to Bitcoin becoming a productive asset on chain.
But there have still been these challenges that have kind of held Bitcoin DeFi back from sort of taking off in the way that I think a lot of people in the industry have expected it to or have wanted it to, especially the Bitcoin holder community. One is just due to the fact that the Bitcoin yields right now are primarily driven
by points programs and inflationary token incentives, which I think a lot of people are
growing tired of. The second one is the DeFi strategies
are just kind of limited right now.
So the two largest DeFi strategies that exist today
are one is leverage looping.
And the second one is basis trading.
So this, and if you look at Ethereum DeFi,
leverage looping is where you're basically taking
an asset like staked ETH,
where you're earning rewards on it.
And you are using that to then borrow another asset,
which you then swap for more staked ETH.
So you basically are increasing your staked ETH position
to increase your Ethereum stake in your rewards.
And this is a multi-billion dollar strategy right now.
And there's a lot of capital tied up in it,
not just on SDETH, but other assets as well.
And on platforms like Aave and others,
some of the largest DeFi protocols.
And then you have basis trading, which is where you're taking an asset and you're essentially,
it's a delta neutral strategy.
So you're not taking on price exposure risk to the underlying asset because you're holding an asset
and then you're basically shorting that asset on a perpetual futures market
to capture the funding rate for that asset. And so these two strategies right now are not
available to Bitcoin holders on chain and unlocking them poses a tremendous opportunity for the Bitcoin ecosystem.
And so this is what we've set out to do with the Bitcoin Summer campaign and with our partners,
is looking to unlock sustainable real yield on Bitcoin, and then amplify that through these two strategies,
leverage looping and basis trading.
And primarily doing that through MaxBTC, which is a new product that's
going to be launching on Neutron, which is tokenizing real yield on Bitcoin.
Mars Credit Accounts, which are these powerful cross margin accounts for lending and borrowing
and perps trading.
And then SuperVaults, which are this unique mechanism that we built at Neutron that protect
LP deposits while also offering centralized exchange prices to traders on chain.
And it does that by leveraging Neutron's built-in Oracle and Neutron's built-in Cron module, which allows you to order transactions on the network.
the network. So at a high level, that's kind of the motive for the campaign, is unlocking
sustainable real yield on Bitcoin and basically enabling Bitcoin DeFi to finally realize its full
potential and unlock these two DeFi strategies. I'll pause there in case there's anything that
anyone wants to add or anything anyone wants to comment or has a question about? Okay. Yeah. So, so, you know, our partners, you know, if you, if, if you haven't seen
announcing, you're listening to the space now, we've been working on these partnerships for a while now with some of the industry's largest Bitcoin projects and other projects as well, like Valence, who we're going to talk to today about the vault infrastructure side of the campaign.
campaign. But maybe one thing to kind of note is, why did these guys decide to work with us?
Like, they're massive, multi-billion dollar projects. Why did they decide to work with
Neutron, who's still growing and is still early stage? Well, part of it is because their assets, you know, a lot of these guys have Bitcoin assets, right, like LBTC, EBTC from EtherFi, you know, and others as well.
And they want to build great products. And part of building a great Bitcoin product is having sustainable real yield for your asset.
real yield for your asset. And so what this campaign will allow them to do is drive real
yield to their asset through lending on Mars. And the lending yield for their assets on Mars
will be derived from the leverage looping demand for MaxPTC itself. So we're creating this system by which we raise all these other projects up and position Neutron as the center of real yield opportunities on Bitcoin, not just for Max BTC, but also for all these other Bitcoin derivatives.
exciting system that is sort of self-reinforcing with all these different assets, Bitcoin assets
that will be part of the campaign, as well as Max BTC and Mars and all these different components
like duality as well, where swaps will be happening for these Bitcoin assets and these
strategies. So yeah, there's a lot to break down.
And that's part of why we're doing the space.
There's a lot to the campaign and a lot to wrap your head around.
And even the team that was working on this for the last few months, it takes a bit for
everything to click and see how everything is self-reinforcing and why it's so exciting.
Aside from obviously the fact that sustainable real yield on Bitcoin is just on the face of it very
exciting. But, you know, everyone wants to everyone that holds Bitcoin, they want to stack
more sats, right? Everyone, a lot of the Bitcoin holders have a goal of having a full Bitcoin now
that Bitcoin's price is so high, or if they have a full Bitcoin, they just want to hold hold more,
right? So yeah, there's a lot to kind of break down in the
campaign. So why don't I pause there and then see before we dive into things with Valence on the
vault infrastructure side of things, which is also pretty cool because we haven't actually talked
about that yet. Does anyone have any questions? Anyone here like Clyde, Haas, Jordan, Max, Fluffy, like anything you guys want to dive deeper on?
I think one thing you mentioned just with regards to, you know, these big multi-billion dollar projects, getting interested in working, like you said, with our project growing like ours, I think one interesting thing to touch on that I've heard you talk about before is how MaxPTC and our strategy to bring real yield to Bitcoin is sort of growing the Bitcoin, the Bitcoin 5 pie for everyone, so to say.
I think I'm going to let you expand on that, as I think it's a really,
really cool feature of MaxBTC. I think it's a big thing that Neutron is bringing to market
because of this. Yeah. Yeah, absolutely. So today, what's interesting is if you look at
the demand for yield-seeking Bitcoin or the total market of yield-seeking Bitcoin,
it's over, I think, $20 billion,
which seems like a lot, but it's actually really small
when you look at like the total market cap of Bitcoin itself.
And so what we're hoping to do with Neutron
and this DeFi ecosystem is that,
and with this campaign, obviously,
that fits into this overall
system is unlock this sort of like ecosystem of real yield opportunities on Bitcoin that spurs
the overall growth of Bitcoin, the asset, and kind of creates this sort of like unlocking effect of
like, you know, moving Bitcoin that has previously been
just kind of resting there. So like me personally, you know, when we've been testing the strategy
and we first, the MaxBTC strategy itself, you know, I've been testing it with the team internally.
And before that, I wasn't doing anything with my Bitcoin. Like I was just holding it in a ledger
and just basically just letting that sit I think like a lot
of people um in the industry that hold bitcoin right they're just kind of letting it sit because
they don't want to really it's not worth putting your bitcoin at risk for at least for me like it
wasn't worth me putting my bitcoin at risk for like shitcoin yields right and like points right
and so um but was what was really attractive for me is sustainable, also high, relatively speaking,
real yield on Bitcoin. And then being able to then further with this campaign, once the
strategies are alive, then being able to leverage Loop that to boost your Bitcoin rewards or basis
trade it to earn the funding rate is very attractive.
So I think overall, like everyone, all of our partners are all in agreement that we want to
grow the pie, the Bitcoin pie, and create a system by which Bitcoin, the asset, can sort of grow into
becoming more than just a store of value. And that's kind of what we're all shooting towards.
Jordan, you had your hand up.
Yeah, I had to hit the unmute button.
Yeah.
One, I have to say pretty impressive
with the lineup of like Bitcoin,
BTC, five partners that you guys have lined up for this camp.
Yeah. the five partners that you guys have lined up for this camp? Oh.
Did we lose you?
Or is it me that I can't hear?
I lost him also.
Yeah, I can't hear him either.
Well, while I was trying to come back,
I actually had my hand up too for a while.
Yeah, yeah.
I was wondering, excuse my ignorance, to come back i actually had my hand up too for for a while but um yeah yeah it's i was uh
wondering excuse my ignorance but like what is the max btc made up of like what does it consist
like what's the underlying bitcoin when you actually deposit it from the very beginning
yeah so you know well there will be a lot of more details about max btc
launched along with like the full dock site that Clyde's been working on, actually, when the vaults go live, I believe is when they'll be releasing a lot more information on that.
But yeah, you'll be depositing. Initially, it'll be RAPBTC. You'll deposit RAPBTC into it, and then you'll get MaxBTC in return, which is a yield-bearing form of Bitcoin.
And so you'll be able to use that just like you would other collateral assets in DeFi
on Mars, for instance.
And then when you withdraw, you'll withdraw back to wrapped Bitcoin.
So whatever you earn, I believe you'll be then withdrawing back into wrapped Bitcoin,
whatever your rewards are, you'll have more withdrawing back into wrap Bitcoin, whatever your rewards are
you'll have more wrap Bitcoin in your account
When you say wrap Bitcoin, what's the actual wrap Bitcoin?
What do you mean, what is the actual wrap Bitcoin?
What is it wrapped from? Where do you wrap it from originally?
Where is that coming from?
If I'm like, hey, I want to deposit my Bitcoin
where is it? That's what I mean like where's that coming from like if i'm like hey i want to i want to deposit my bitcoin like
where where is it like where is it that's what i mean yes i think you know the the actual wrap
bitcoin itself is coming from ethereum um where wrap bitcoin is is originally minted i believe
but the the team itself they'll have all the details of that when MaxBTC goes live.
I'm not 100% sure.
Yeah, I'm just wondering where that comes from.
Is it from Axler?
Is it from, you know, like, who's it coming from?
That's what I want to know.
It's getting minted on Ethereum, and that's also, yeah,
that's where the red Bitcoin is getting deposited.
Yeah.
So it's coming from Axler then?
Does that work?
How it's getting bridged? Yeah, how's it coming from Ethereum
over to Cosmos?
Yeah, I got the...
We're going to release the strategy
workflow shortly. For now, we're going to
have to tease it a little bit because
we've got to wait for the rest of the team
to be ready to release that, but we'll get into the technical
details in the coming weeks for sure.
Well, that's actually...
I totally get what wrapped it. Yeah, that's actually, that's exactly why I'm on the call, right?
I totally get what Rapp, yeah, I'm not trying to cut you guys off or get, like, confrontational or anything.
I know what Rapp Bitcoin is.
I'm just wondering where it's from because there's, like, a million, the problem, like, this is, I'm a big, I've always been a real big Bitcoiner.
And I see the problem, not that I don't like what I'm hearing about Max BTC.
The only problem that I see, and Zion was kind of alluding to this earlier,
is I'm kind of the same way with my Bitcoin.
It's on a hardware, and there's probably a 0% chance for that Bitcoin
to ever in the history of humanity probably go on chain.
But my other stashes that I have that I'm willing to degen and trade and do stuff with it,
then that would probably be mine because it's just kind of like my risk appetite that I have.
And then I always want to know where is it coming from and who's doing what
because it's just like I've seen there's so many vulnerabilities.
And I do think that when it comes to vulnerabilities,
the space is a million times better than what it was, especially in Cosmos.
So that's all I was wondering.
Like, I know what wrapped Bitcoin is.
The problem is that there's like a million derivatives now.
Like, where is it coming from?
Is it from Babylon?
Is it coming from Axler?
Is it coming from, you know, Nomad?
Like, where is it coming from?
You know what I mean?
Or Nomik, excuse me.
So that's all I was wondering.
Like, there's like Coinbase wrapped, wrapped you know like there's so many different
derivatives and i don't know if it's going to be like a basket or if it's just like hey you
deposit it once and then you know then we have this max and then it comes up with these vault
strategies and it's by you know um all these different protocols or whatever that's that's
all i'm wondering about because like the the 10 to 15% definitely piques my interest.
It's just like the Zion's point earlier,
if it's like a lot lower than that,
it's just like no matter what,
it's always going to be hard to get people.
And rightfully so,
because like if you look at Bitcoin, right,
it's like it's probably going to keep going up
over the next like 10 years,
give or take like 20% a year minimum.
So it's like, oh, you know,
one year it goes up 35 and next it's 10. One year maybe it's down, but like, you know, collectively
and it's like, do I really want to risk throwing like, you know, all my Bitcoin into any protocol
for only potentially, you know, that sort of upside, unless it's like something substantial.
My, my, I digress my rants over but i definitely
like you know seeing bit5 b btc5 being kind of like a vocal point because that's obviously um
it's just yeah like the the tokenomic and the it's just inevitable that bitcoin is obviously
a clear winner so it's nice to see that bitcoin's becoming more of a currency throughout all of
crypto but anyways hopefully that made sense yeah yeah of course i mean it's a to see that Bitcoin's becoming more of a currency throughout all of crypto. But anyways,
hopefully that made sense. Yeah, of course. I mean, it's a good question. Like, where is the Bitcoin coming from? Of course, it's like people said, wrap Bitcoin on Ethereum. And that's actually
a perfect transition into Max and talking about the different phases of the campaign. The first
phase of the campaign is the deposit phase for vaults. And so
this will answer your question exactly. Max, take it away.
Yeah, for sure. And Elijah, I see your hand up. Do you want to go first or do you want me to?
Yeah, I was going to make an unrelated point. So just to just to like jump in,
because there was something else that that that haas said that um probably
wouldn't be interested in that answer which is just like you know the way i see it is you know
as financial systems evolve um or like even in you know defy right like there are things that people
don't um that are new and when something is new the like market doesn't have an entire like doesn't have
a really complete understanding of it right or maybe there's some risk that like you know the
protocol might get hacked right um or there's some uncertainty on whether like the strategy
will last for like some period of time um or you know it could be any number of things um but the
idea is that over time right as things like survive that risk diminishes
um and people become more and more open to whatever is going on um so i i think the you
know like 15 10 to 15 yield is like attractive you know the reality is that like you know as like
hundreds of millions of dollars come into the you know into the strategy you know probably doesn't
maintain 10 to 15 yields um but the idea is that like you know as long as, you know, into the strategy, you know, probably doesn't maintain 10 to 15% yields.
But the idea is that like, you know, as long as the, you know, protocol is still standing two,
three, four, five years from now, the like hurdle rate, the like amount of risk that people are
perceiving that they need to be taking on will just keep decreasing. And we, you know, we see
this with like Uniswap and Aave and all these other protocols that have just been
around for such a long time. So I think about these things a little bit more in terms of risk
adjusted returns. And yeah. But yeah, I want to hear what Max had to say as well.
Yeah, I can hop in here because one of the really insightful things that Haas said was,
okay, how do you actually get your Bitcoin to this opportunity?
Are we expecting these hardcore Bitcoiners to learn how to use Metamask or Kepler?
And are they going to bridge it over?
And then after they bridge it, are they going to figure out where to go to what chain?
That's a pretty big ask of some Bitcoiners.
And most Bitcoiners are at least familiar with Ethereum.
They're familiar with RAPTC.
That's like an ERC-20 token on Ethereum.
They're familiar with like vaults on Ethereum, like some ERC-4626 vaults.
And so one of the really insightful things that the Neutron team came to the TimeWave team about to utilize Valence to build was like, can we use Valence
to make it as easy as possible for people that have assets on Ethereum to get those assets to
Neutron, earning yield with this max BTC strategy? So one of the things that the TimeWave team has
been working on is like really pushing Valence to its limits and using valence to do exactly that um uh we're
nearly done we're actually in the process of doing a little soft launch like right now um with uh
this cross-chain vault and what it does is uh it sounds really simple but the how it's actually
done behind the scenes is quite complicated we're in the process of simplifying it but it's
essentially a a vault on Ethereum
that someone can deposit their RAP BTC or LBTC
or whatever the BTC derivative is,
deposit it into the vault, and then they're done.
That's all they had to do.
They just sent it to this address, and it works for them.
On the back end, Valence routes that asset to Neutron
and deposits it in the right place.
So Valence handled all that. And then something that the Neutron team wanted to do is like, okay,
it's one thing to make it really easy for assets to get from Ethereum to Neutron. They also really
wanted this to be something that would increase adoption of Neutron as a whole, not just this
specific Max BTC strategy.
So one interesting design feature to this cross-chain vault is that in order to withdraw assets, people will have to go to the Neutron chain to withdraw those assets.
So hopefully this will not only increase adoption for Max BTC and make it easier for people
to adopt that strategy from Ethereum and eventually other chains,
but also lead to an increase in adoption of Neutron itself and all that.
Yeah, Elijah, feel free to jump in.
Yeah, so another thing that I've seen a little, discussed a little bit so far,
and I joined in a little bit late, so, you know, bear with me.
But, you know, I heard like Paws make an interesting point, which was like, you know,
I have my Bitcoin in my cold storage, and then I have like, you know, a little bit that I play
around with on chain.
And, you know, I'm not touching what's in cold storage.
And I actually agree that a lot of um the largest
existing btc holders have this thinking um i think it's definitely true that there's like headwinds
where like btc uh you know phi in general is taking off and you know a lot of miners um and
more conservative btc holders have like started to get engaged with the chain in like numerous
different ways whether it's you know through baby or Ordinals or any of these other headwinds recently.
But I think like another great point is that, you know, there's a lot of people in crypto
who are risk seeking or willing to take on risk or, you know, love being early adopters.
And I mean, in general, you know, I think Bitcoin is the unique asset where every single
person in crypto would be happy to have exposure to it.
And I think the question is that that segment, you know, and you can't say that the same about any other asset, right?
You know, it's not true that every single person in crypto probably wants sole exposure.
Everyone in crypto wants youth exposure, right?
Bitcoin is kind of the unique asset in that way.
So I really think like the addressable market is much larger than just like, you know,
who's holding Bitcoin in cold storage, but it's really like, you know, why haven't those people
used Bitcoin yet? And I think it's largely because, you know, what could they do with it on chain,
right? They can maybe like LP wrap Bitcoin, maybe they borrow against wrap Bitcoin. But like
compared to like, you know, ETH and what you can do with ETH and Steeth and Sol and Gito Sol, you know, you just haven't had that same thing for Bitcoin yet.
And so, yeah, I mean, like Lido, you know, Lido and Gito are two of the largest respective protocols on Ethereum and Solana.
So we really do need something like that for Bitcoin.
And yeah, that's why I'm pretty excited. Jordan, you had your hand up. Do you want to jump in? Yeah. So hopefully this tries,
this works again. I'm going to give this another try because my ex crashed when I tried to speak
last time. So hopefully everything's okay. So to echo, I guess guess like on haas's point i think another way
to rephrase what haas is trying to ask and maybe this can't be directly answered because maybe it
reveals as to what's coming up next for this campaign that hasn't been revealed yet but i'm
assuming from haas's uh statement and in inquiries like he's trying to figure out what are like the
security and trust assumptions that
are being made for someone to take their Bitcoin wherever it exists and deposit it on whether it's
on Ethereum or however it's getting over to Neutron and so that could be Axelar it sounds
like it could be other sorts of bridges or is it is Valence just minting the new asset on Neutron
etc and I'm assuming that's where Haas is coming from and then my follow-up to that is so Um, or, or is it, or there is Valence just minting the new asset on Neutron, et cetera.
And I'm assuming that's where Haas is coming from.
And then my followup to that is, so not only like what security and trust assumptions there
are for the Bitcoin itself and the new asset that's going to be on Neutron.
Um, but also where is the yield coming from?
Cause in the past we have seen, um, yield coming from like the inflation of Babylon
we have seen yield coming from like the inflation of Babylon token itself.
token itself.
But it sounds like with super vaults,
like yield can actually come from lending and borrowing of the assets itself and
through LPs and whatnot.
And so I'm assuming super vaults are going to help simplify that.
But I would love to, I think everyone listening here would love to like dive in
more as to like more into super vaults and where the yield is coming from.
Yeah, Elijah
or Max, do you guys want to talk a little bit about
the trust or the security
assumptions associated with this?
Yeah, I can talk about it.
So I do,
unfortunately, I think that
we're going to hold off on the max btc um
like going deep into the strategy because like the the team is going to be doing you know like a
launch announcement um within the next you know short period and so like you know i kind of want
them to have that moment to kind of go into it um So, yeah, I'm going to hold off on that.
But you will get an answer to that.
You have my word.
In terms of the broader campaign, where is the yield coming from?
So I think the level of abstraction that might be useful is think about all these assets as different Bitcoin denominated strategies.
you know, think about all these assets as different, like, you know, Bitcoin denominated
strategies, right? You kind of have like these Babylon LSTs, right? Which are like,
essentially just a staking strategy, right? And the strategy is like, you know, what delegators,
you know, what, what AVS is, is this like, you know, LST delegating to, right? It's a simple
strategy though, and it earns Babylon points, as well as like the LSD points, right?
Then you have like, you know, RAP Bitcoin, which is just simply holding Bitcoin.
And then you have MaxBTC, which is this like higher yielding, you know, CD5 strategy.
And, you know, how does yield get created between these?
And, you know, what is the interaction between these?
Because I think that's kind of your question is like, you know, how does SuperVaults come into play?
How does Mars come into play? You know, what does it end up looking like?
So, you know, there's a few different things. Like one is the, you know, you can almost break
up DeFi into, so, you know, as with a lot of things, there's a power law, right? In what people actually do in DeFi and crypto,
like what types of financial activities to engage in. And at the top of this power law,
there are two activities, right? There's leverage looping and there's basis trading,
right? There's people who are essentially using assets as collateral, and then either like hedging
that exposure on perps or in the funding rate, or, you know, leveraging up on that collateral, you know, by like, you know, borrowing some
asset, converting into the collateral asset, borrowing more and looping that over and over
again.
And so, you know, these types of things that like Mars supports essentially, you know,
in order for them to work smoothly and safely, you need a lot of liquidity. And you need that liquidity to be market made effectively, efficiently, safely, with little
risk of the people who are actually putting up their capital to LP of taking bad trades.
So where super vaults come in is essentially super vaults are the liquidity source that
will make it safe to use all of these assets as collateral, right?
Safe in the sense of like, you know, if there's some price change and some of these assets get liquidated, you know, super vaults are there to support the liquidity for it.
And how super vaults do this in a way that's mutually beneficial is that so when assets get liquidated, they're actually sold to a liquidator at a discount.
This discount is like, you know, at maximum 5%, right?
So the liquidators incentivize basically to liquidate because they're given a bounty of about 5%, let's say.
And what super vaults do is they quote at tighter spreads.
So they give good prices to normal traders.
But they know that, you know, these liquidators that these liquidators might be liquidating this
collateral at any moment. And to be responsive and ready for that, what the liquidity providing
strategy on Supervolts does is it starts providing liquidity at a 2% discount or a 3% discount.
So essentially what happens is when a liquidation gets triggered, the liquidator would get paid a
5% discount. If it wants to useaults to like offload the risk immediately, 2% to 3% of that would go straight to SuperVault LP, you know, because a portion of the SuperVault LP is being provided to basically backstop the liquidators at a discount.
at a discount. So, you know, it's a win-win essentially because, you know, as a SuperVault LP,
you know, you're basically willing to take, when you LP assets, you're willing to take on exposure
to those assets. So you don't mind buying inventory at a discount. As a liquidator, you know, your
needs are a little bit less about holding inventory to some asset and a little bit more about how do
I get in and get out as quickly as possible so I can get like relatively risk-free profits very quickly. And so, yeah, the idea is that like these super
vaults will be market making it like the most recent centralized exchange price. They'll be
efficient. They'll maximize, you know, the amount of safe leverage that can be offered on Mars in
various different ways that'll let Mars capture a large portion of like the demand for these types
of trades, right? You know, like basis trading, leverage looping, and in general, just using these assets as collateral.
But right now, these things just don't happen for Bitcoin because Bitcoin is just not on chain.
So the idea is like, how do we like make this as possible or as likely as possible to happen on Neutron,
you know, on Mars through SuperVaults and kind of bring it all together with all these different BTC partners.
Yeah, that's a really great breakdown.
And there was an earlier point that was made of, oh, is Valence minting a new token?
I'm really glad that that was brought up because before I get into how that works, let me just
sort of take a step back and answer what Valence is.
So Valence is a cross-chain virtual
machine and so what that means is that actions that individuals can take we could we can enable
for like blockchains themselves or vaults themselves and so uh what we are doing in this
situation is that we we are like valence is not minting a new token. Valence is an abstraction layer over existing bridges, existing infrastructure, and stitches it together to create the desired functionality.
In this case, being able to automate the transfer of assets from Ethereum to Neutron.
And so Valence is not minting a new token.
It is doing the bridging, whether it's IBC or RECA or different assets use different bridges. So whatever bridge is optimal for that given asset, whether it's LBTC,
WBTC or others, what Valence does is just abstract over-existing infrastructure
and get the actual asset to where it needs to be. No new asset issued.
needs to be no no new asset issued. One of the reasons why I actually love that that the question
was brought up is that people have just gotten so used to wrapped versions of things, because it's
easier to just like, Oh, you know what, I'm not going to decentralize this, I'm not going to make
this super robust and transparent. Like, I'm just getting out of custody the asset, and I'm going to
issue a wrapped token. And so many, like so much of DeFi has been so conditioned to this that
the first guess is that, yes, this is going to be another version of that to be wrapped. And so
one of the things that we're really excited about is sort of breaking that pattern and showing how
sort of broken that is, and how easy and possible it is to actually be providing best
in class decentralization automation cross-chain for all of this.
So you've had your hand up for a while. Do you want to go?
Yeah, I do think at some point, especially with like Bitcoin's token tokenomics where unless the price is
like a absorbent really high it's gonna be really difficult for people to mine
it so you're gonna have you're gonna get to this point where Bitcoin is gonna
need to be used and not just like oh yeah it's just a store value like that's
what I think I could be totally wrong maybe maybe in four years or five years
bitcoins at like a million dollars and then like it's still as feasible for people to mine but you know I did the math not, Bitcoin's at like a million dollars, and it's still as feasible for
people to mine. But I did the math not too long ago, maybe like a few months ago, and it seemed
like it costs on average, depending on where you're at and energy prices, but it was roughly
around like 60K just to mint like one Bitcoin, which still technically is profitable at these
rates. But so anyways, my ramble was is that I do think eventually there's going to be more Bitcoin on there just because people are going to have to.
Right. It's like I don't know who would just like have, you know, idle Bitcoin.
And I think the best use case for Bitcoin, obviously, besides the value of it going up, is being able to borrow against it.
You know, it's like most people, especially OGs, like they just don't want to sell it, right? Like,
they're just like, I want this, and I'm never going to sell it. But I mean, anyone with a
brain would probably be like, all right, well, at least I want to borrow like 15 or 20% against it.
And for them, that's a pretty conservative figure. And then using that capital to do
whatever with it, either to pay bills, invest, buy things, buy more Bitcoin or whatever it is.
So it will happen.
And I do like – I just like to see that come because I think it makes everything stronger.
of stake chains and tokenomics and everything, they're kind of, unfortunately, the buy pressure
is just not there to be sustainable for having like an inflationary token.
So having subsidies with like Bitcoin should definitely help it out.
And I am interested in seeing kind of the trend of like different foundations trying
to put Bitcoin on their balance sheet.
I mean, you're seeing it with like Fortune 500 companies.
So I think it's probably going to be a staple
in crypto as a whole too,
is like, hey, let's at least put 10% or 20%
or the community funds or whatever into Bitcoin
and try to be sustainable
because the markets this cycle
have been really, really tough.
Whether it's just like the interest rates are too high
and it's hard to borrow, so there's not as much money in the markets and then the competition and
everything else, you know, like I do think this cycle is completely different. And when people go,
well, look at the last one and the one before that. And I'm like, yeah, I get that. But was
there were there ETFs last cycle? And do you think the people that are buying Bitcoin or say even like a Solana ETF
or Ethereum ETF, do you think that those people are going to be like, hey, I'm going to sell and
get on the risk curve? Probably not. So, I mean, it is kind of like our survival of the fittest
out here. And having Bitcoin on your ecosystem with like deep liquidity is definitely going to
help like tremendously. If you don't have that that i really don't know how any of these ecosystems are really going to survive unless
you have like a perfect niche and you're just doing something like exorbitantly different than
anyone else so you know i i do like this i'm more like obviously it's hard to conceptualize it right
now without being able to see like hey it's this is the vault like this is what it's made up of
and you could do this and that but like to 10 to 15 percent to start off would definitely get the juices flowing for sure
so i'm i'm very interested in it and yeah man yeah i mean that's a good point like what you're
saying you know building deep liquidity for bitcoin on chain is is a good um is a good goal
for a lot of chains to do and i just wanted to make the point about about
this campaign that it's not only about building liquidity for bitcoin on chain like that's one
small piece of the puzzle would be like incentivizing lps but really like what these
vaults are doing when someone deposits into the valence vaults that's max was talking about
they get bridged to neutron and deployed into the def the DeFi on Neutron, not just a single LP,
but we're sowing the seeds to grow a DeFi ecosystem right from the vault deposits.
And so if you look at the blog post, you can see in the first image,
it talks about what happens when you deposit into a vault.
And so a portion of your wrapped Bitcoin that you deposit gets lent on Mars.
A portion of it gets provided as liquidity on super vaults like Elijah was talking about.
And so we're already starting to lay the groundwork for increasing borrow capacity for Bitcoin on Mars.
We lower the cost to borrow the different partner projects, Bitcoin on Mars.
Deepening
liquidity for swaps.
That's how we set the
groundwork for the two strategies that
Zion was talking about in the beginning of the space.
The basis trade and leverage looping.
And so adding
these vaults
are now setting the stage for those
two strategies to go live with max BTC as it launches.
Go ahead, Max.
Yeah. Just, just one thing I wanted to add was if we just like to zoom out a
little bit and just look at where Neutron sitting in the competitive
landscape and just, just the overall situation,
there's a lot of competition happening right now
for liquidity. All assets compete against all other assets for collateral. And so
there's hype and hyperliquid that is really killing it with perps. And now that they've
done a great job with perps, they're expanding into a larger ecosystem. That's one way of really
going about things that seems to be working.
There's Celestia that sort of took a different approach
of being more platform first without really getting adoption.
That's been harder for them.
And so far, Neutron has sort of been on that side of things.
And like Foss said, it's a tough market for protocols
that don't have really strong fundamentals and adoption
and revenue right now.
And so what I really love about this strategy that Neutron is doing right now is that it
is really leading in to where its competitive edge can really shine and doing in a way like
we were saying earlier, that can really get this DeFi flywheel going a lot.
So first of all, this is natively cross chain, right? If you
want to do something with Bitcoin on Neutronic already, that is a cross chain thing. You have
an asset from the Bitcoin blockchain doing something on the Neutron blockchain. Second,
like we're saying, it's not just getting it onto the chain and having deep liquidity for it,
but it's bootstrapping the entire DeFi flywheel with like lending and liquidity and everything
else that's involved.
And we're not just doing it with a points program.
We're doing it in one of the two power law successful ways of effectively basic trading, among other things.
So all of those make this really exciting because people can now have really high yields on Bitcoin.
If you look on-chain at what your opportunities are for Bitcoin now,
most people will use their Bitcoin as collateral, borrow stables against it,
and then use those stables to get yield. And when you do that, you're looking at yields in like the
5%, 6%, 7%, which is not super attractive when the risk-free rate is like 4.5%. So I think that
this strategy has the potential to be a really big game changer for Neutron.
Really put Neutron on the map to show how cross-chain can really be a difference maker.
And what Valen is doing is playing its small part in making those cross-chain aspects as seamless as possible.
People shouldn't actually have to think or be intimidated by the fact that, oh, it's cross-chain, we have to to now do all these things. What all people should care about is that, hey, I have this asset and I
want to get yield on this asset. What is the best way? What is the sort of risk-adjusted return that
I want to take for that? And like they should be able to do that with like the click of a button.
So that's what we're helping to do with Valence and really excited to see how this plays out for
Neutron.
Elijah, do you want to go next?
Yeah, just to add on to the intentionality, right?
Like Neutron from the start has been built to be a house for yield bearing assets, right?
Like, you know, the team spun out of Lido, you know, Drop was incubated, you know, to tackle this problem for Cosmos assets.
Mars is like this incredibly advanced,
any asset has collateral,
perpetuals, cross-margined with lending protocol, right?
Like there's literally nothing like Mars
across all of crypto.
And Mars is like, you know,
uniquely suited to unlock utility
for yield bearing assets.
So, you know, to the point,
you know, to Max's point,
which is about being intentional about strategy, you know, like, you know, to the point, you know, to Max's point, which is about being intentional about strategy, you know, like, you know, we did this for Cosmos assets.
And I think the reflection of that, too, was that, you know, in order to grow Neutron, its user base and accomplish our missions, you know, a big step in that would be bringing in assets that appeal to a very, very large market.
And there's no asset that, you know, appeals to a larger market than Bitcoin.
So, you know, by bringing like yield bearing Bitcoin to Neutron in various different forms,
whether it be Babylon LSTs or Max BTC, right, we're kind of just playing into all the the intentions that were behind
making neutron the way it is in the first place and all the unique features that exist in it
go ahead jordan you know the part i really like about super vaults is um and this reminds me a
little bit of like the original dFi summer on Ethereum, right? Where
people would come up with these elaborate DeFi strategies. What I love about Supervaults is
you just deposit them to the vault and that's it. And then all the complex groundwork and strategies
are all done in the backend. And it sounds like Valence and Supervaults are really, and Neutron's
infrastructure is really a match made in heaven for lack of a
better analogy right so I'm really excited about that to like experiment with it and you know
deposit some bitcoin or deposit assets to to get access to this you know these different
defy strategies I guess you know would be interesting to know is like Haas brought up
an interesting point of like
depositing Bitcoin and lending against it or borrowing against it. Right. And for like either
those who are very conservative with their Bitcoin, you know, but they do want to borrow against it.
Like what is their, is their liquidation risk? Is that risk? I'm assuming that's kept to a minimum with really safe, like very, very low risk conservative strategies. Or I'm assuming there'll be super vaults for a spectrum of risk across the board. Or what does that look like?
Elijah do you want to talk to that point
Elijah, do you want to talk to that point?
yeah I'm not gonna lie I was I have like you know 20 emails that I was just responding to
so I didn't hear the question I'm really sorry it was it was about liquidation risk so like for the
I think there's two things here Jordan is one is like the you know is there any liquidation risk
for the Bitcoin summer vaults themselves and then the other one was like is there any liquidation risk for the Bitcoin summer vaults themselves?
And then the other one was like, is there basically liquidation risk for like these
max BTC strategies? So like once max BTC launches and you have leveraged looping and basis trading
live on Neutron, you know, how, what does the risk profile look like there?
Yeah. So, so the, the the like um so one way to think about
it right there's two elements of the campaign right there's the supply side and then there's
the demand side right the supply side is like all about how do we make it as simple as possible
and accessible as possible for as many users as possible to engage in you know, liquidity providing, whether that be lending or, you know, LP spot assets,
you know, trading. And yeah, so like the supply side, there's no liquidation risk
because you're not taking on any leverage. You're essentially just providing the liquidity that's
necessary for people to borrow assets and for people to, you know, eventually use other
assets as collateral, because in order to like list assets as collateral, in order to
like increase the capacity for assets as collateral, there needs to be more spot liquidity
or like AMM liquidity.
Because without that liquidity, liquidators will not have a place to quickly offload the
risk of holding risky assets.
So when like, you know, essentially what happens in liquidation for people who don't know,
maybe everyone knows, sorry if everyone knows, is so, you know, someone's position,
you know, goes underwater. And what the liquidator does is they repay that person's loan.
the liquidator does is they repay that person's loan. And then they basically get the collateral
in exchange for that at a discount. And then, you know, a liquidator is pretty risk averse,
right? They're like a mercenary. They just want to get in and get out. So in order for them to
get in and get out, they're going to sell on like a spot market as quickly as possible.
So in order to like increase the capacity for leverage in the system,
you need more spot liquidity. So by providing spot liquidity,
you don't take on any liquidation risk. You yourself are not like leveraging,
but you're supporting people who are leveraging to leverage up more safely and
liquidators in being able to minimize their risk.
And then on the demand side, right,
you have the actual people
who are now using this increase in capacity
to, you know, enter and exit larger positions
because now there's more spot liquidity.
You know, the collateral capacity is larger
because it can be done more safely.
So now you might have people who are,
you know, borrowing in size
more than they were previously,
or people who are taking out
like larger delta neutral positions through basis trading and these types of things. who are borrowing in size more than they were previously, or people who are taking out larger
delta neutral positions through basis trading and these types of things. And these people will have
to risk manage more actively just because they're taking out leverage positions. But that's more so
on the demand side and the trading side. Yeah. Maybe it's also important to maybe
highlight the timeline and the sequencing of all these things, because we've kind of been talking about a few different phases of the campaign throughout this conversation.
So one is the vaults themselves before MaxBGC goes live.
So there's basically like two components of this.
There's like before MaxBGC goes live and then after, right?
So the vaults before MaxBTC goes live, which hopefully will be going live in a few weeks,
those vaults will, like Elijah said, be lending a portion of the deposited assets on Mars and
then using the other portion to provide liquidity on super vaults. So that's, you know, that's kind of like phase one.
Then phase two, and there's no like leverage looping or basis trading strategies available yet
because the, because MaxPTC isn't live yet, right? Then once MaxPTC goes live.
Just to clarify, there will be basis trading. You can basis trade with like LB,
like any Bitcoin asset.
But yeah, so leverage, yeah, not as much.
Okay, cool, cool.
Okay, so yeah, so that's before MaxPTC goes live. And then, you know, the vaults themselves will start off with deposit caps
that can be increased as demand grows.
And then eventually, as we get close to the MaxBTC launch, we'll
remove the deposit caps. And then you'll have uncapped deposits. You can deposit into these
vaults a bunch of these different Bitcoin assets. And then when MaxBTC goes live, you'll be able to
obviously deposit into MaxBTC itself and earn the real yield that Max BTC offers.
And then you'll be able to leverage looping basis trade using Max BTC on Mars. So that's when those
strategies will become available with Max BTC once that launches. And at the same time,
some of the liquidity from the vaults will convert to max BTC liquidity once
that launches. So like wrapped Bitcoin liquidity in the super vaults, like if you're in these vaults
earning the rewards once max BTC goes live, you'll actually earn the max BTC yield as well
by being in these vaults because a portion of the liquidity that's in RAP Bitcoin
will convert to max BTC. So you'll earn that in addition to the lending yields, the market making
yield, neutron tokens, partner tokens, and any other incentives on the vaults.
So just want to be clear, obviously none of this is financial advice.
We're just going over like, you know, how the campaign will work.
What are the different opportunities that are available for everyone?
And, you know, for for for a full breakdown of like the sequencing of everything as well.
That's also in the ultimate guide to Bitcoin summer, which is linked in this post at the top of this space.
So you can go in there and you can see how everything will work.
And it also runs through an example of, you know, here's how the vaults will work before Max BTC launches using LB at about an hour. We've been going for about an hour now. This has been a really
productive conversation. We've covered a lot of ground. We'll be doing more of these, of course,
We've covered a lot of ground.
We'll be doing more of these, of course, in the coming weeks, especially as we announce
some of the other partner vaults and some of the specifics, like the incentives that
will be going to those as well.
But any last questions or anything anyone wanted to share in terms of closing thoughts
or anything on the space.
Yeah, I just want to share that I think it's actually per Elijah's point as Neutron being the home of yield bearing assets,
Mars is this unique protocol and it's kind of MaxPtc is this beautiful showcase of uh integrated architecture i'm i'm really excited to finally for for valence to get uh their their time in the sun and really
showcase what uh what an interchain vm does and i think i'm just i'm just very excited to see this
coalescence of all these parts of neutron comeron come together at once. I think Max kind of killed it
explaining what that is, and it'll be fun
to see it come to live in the Max
BTC context coming up.
Yeah, I appreciate that,
Clyde. We've been iterating a lot with
the Neutron team. We've done several different
cross-chain automations, and
of everything we've ever done for Neutron, I'm
most excited by the prospect of this
cross-chain vault. So hopefully this makes people's lives easy
and helps us get a bunch of BTC to Neutron.
Yeah, absolutely.
And for everyone that's listening,
if you want to get notified when the vaults do launch,
there's two different ways you can do this.
They're both linked in the announcement post
that's at the top of the space
that's also pinned on Neutron's Twitter. There's the Bitcoin Summer Announcements Telegram channel,
which we'll be posting in as soon as the vaults go live, as well as a type form you can fill out
if you want to receive an email when the vaults go live. And both of those are linked in the top of that post.
So definitely join the Telegram or fill out the type form
so you can get notified as soon as all this stuff gets going.
Awesome.
Well, thanks, everybody, for joining.
This has been fantastic.
And we'll see you guys in the next one.
See ya.
