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Sonic DeFi: Liquidity and Yield Strategies
Recorded: March 20, 2025 Duration: 0:49:51Space Recording
Short Summary
In a recent discussion, leaders from Origin, ICHI, and Euler shared insights on the evolving DeFi landscape, highlighting significant project launches, innovative yield strategies, and the importance of partnerships in driving growth and liquidity within the Sonic ecosystem.
Full Transcription
Yn ystod y cyfle hwn, mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn.
Mae'r cyfle hwn yn ystod y cyfle hwn. Mae'r cyfle hwn yn ystod y cyfle hwn. Yo, yo, yo, what is up everyone?
If you can hear me as always, can you give me some emojis, whatever emojis, 100s, hearts,
whatever it may be. So I'll make sure you guys can hear me loud and clear.
Awesome, awesome, okay, cool.
We'll get started shortly here.
Let me bring up some of our guests.
Let's see.
One second.
All righty, here we go.
Okay.
All right, we got a nice little space for you guys today.
I'm just sending out messages here to get everyone up here.
All right. All right, guys, we'll hang tight for another
minute and then we'll go ahead and start this off as usual. We got origin protocol each he appeared
Hey Lewis, how's it going? I'm doing well, man. I'm doing well. How are you? Good. Thanks for having us
I think Rafael will be speaking on behalf of origin if you can invite him up on stage
It's checking the audience. I think we probably have a couple in here
I see Michael from Euler is also in the audience. We can invite him up. He'll be
Earlier. There we go. Okay, cool. Awesome. Thanks for letting me know awesome
Rafael's up here
Okay morning. Good morning GM GM. I
Sent my poor request so he should be able to set that when he's ready
Awesome. Hey, Louisa. This is this is Jeffrey representing each year swap able to accept that when he's ready. Awesome. Hey, Luis.
And this is, this is Jeffrey representing each and swap X.
Oh, so Jeffrey. Awesome. Thanks for being up here, Jeffrey. Michael,
you're up here as well. Okay, cool.
Awesome. So we got a Rafael from origin,
Jeffrey, each Michael here from Euler. Okay. Awesome. Okay.
We'll give it about 20 more seconds
just for people to come join in.
Let's see.
Hey, Louis, if you can add me as co-host,
I can try and pin some tweets on relevant topics
while the conversation's going on.
Perfect, just did that right now.
Let me know if you got that invite.
Sweet, I got it, thank you.
Awesome, awesome, okay, cool.
All right, yeah, we'll get started here.
We'll get started here, guys.
We have a very nice space here, all focused on Sonic DeFi.
As you can see right here, it's liquidity and yield strategies.
We got Origin, Ichi, Euler here.
And just to talk about different strategies
going on within the ecosystem, right and then we'll go ahead and and get into the questions shortly as always guys
You know share the space with your friends
We're gonna we're gonna we have a list of questions. We're gonna go through
Throughout this whole space
And yeah guys, we hope you enjoy it and as, if you want to do an intro on your side,
on the origin side as well. I'm sorry, I forget who's on the other side on the origin product on the origin account. Ryan's here. Right. Okay, Ryan. Okay. Awesome. Okay. Cool.
Ryan, if you want to, if you want to kick it off as well say some words and then we could get into Some intros and then we'll go from there
Yeah, sure thing. Thanks for having us
So you guys may be familiar with origin protocol by now
We launched on Sonic a month and a half two months ago with our liquid staking token origin Sonic OS
We provide boosted yields on s with a lot of different opportunities within Sonic DeFi that we'll get into
And one of the focuses on the space that we want to talk about is yield forwarding
Which Rafa will talk about?
But I'll let them do the intros. I'll let them take it away. I don't want to go on too long here. Thank you
Yeah, awesome, we'll do we'll start with interest we'll go with Rafa as first and then we'll go down the line to Jeffrey and then Michael go ahead Rafa.
Thanks for thanks for having us. First of all, like it has been great to build on Sonic. So I'm Rafael from origin and part of like the management team. We build DeFi products for smart money and one of these products is Origin Sonic,
which is like an LST on Sonic. And we integrate deeply with the Sonic ecosystem now by providing
this LST as a yield bearing token to provide the efficiency liquidity strategies. This is what we have been really focused on the last year
to enable this yield forwarding functionality, which
allows some programmable yield and very cool DeFi games.
That's it for me.
Thank you, Rafa.
Great to be here again with you and great to be here with the Origin team.
Luis, thanks for having us.
My name is Jeffrey and I represent ICHI and Swapx.
So ICHI is the liquidity strategy that's natively built into the Swapx exchange.
And what makes ICHI and SwapX work so seamlessly is that
Ichi is focused on single token deposits which makes the user experience very
seamless almost like you're just staking a token and once you deposit your one
token you pretty much get to just sit back and have optimized yield with
reduced risk.
I'm really looking forward to talking about some of those DeFi strategies in more in-depth
today and just really excited to be here and be part of this sonic boom, if you will, on
the DeFi side.
It's just been incredibly exciting and really bullish. So really looking forward to it guys.
Awesome, thank you, Jeffrey.
Pleasure to have you here.
And Michael, last but not least,
we'll go ahead and give us an introduction
on yourself, please.
Yeah, huge thanks for having us on.
So yeah, I'm Michael from a CEO of Euler Labs.
Euler for those of you that don't know
is a lending and borrowing protocol,
much like Aave or Morpho.
We launched on Sonic, I guess, what we're talking about a few weeks back and already we've made it to a hundred million dollar market.
So we've seen massive, massive growth. Yeah, hugely excited to be on Sonic.
It's been a great, massive welcome from the community. So huge thanks to the guys at Sonic Labs
for making it possible.
Yeah, some of the main things we've seen a lot obviously
is the use of LSTs to perform carry trades on Euler.
One of the big features that we have
is like a multiply function effectively,
which allows you to put on some of these DeFi strategies
in a single click.
So it'd be interesting to hear how that compares
with the issue stuff as well.
But yeah, very, very much happy to be here.
Thanks for having us.
Of course, of course.
Thank you guys all for being here.
Ryan, we've got a set of questions here.
You wanna kick it off
and then we could just flow from there?
Yeah, sure thing.
Let me just get back to my laptop here.
Give me one second.
No worries. We could go ahead and kick it off here.
We've done the intros. Again, this is very focused on DeFi.
So the first question I have, we could go across the board here.
And we'll start with Rafa, and then Jeffrey can chime in, and Michael.
From what you've seen so far, what types of pools do most users prefer to participate in? We'll start with Rafa and then Jeffrey can chime in and Michael.
From what you've seen so far,
what types of pools do most users prefer to participate?
Have you noticed a target APY range that
Power Users are looking for to become an LP? Rafa, go ahead.
Yeah. Thanks. I can take a view on this one.
For my observations, that we have been mostly also focusing
on AMMs and stuff like that. Talking to also some crypto funds, they tend to prefer stable
coin pairs or stable coin pools, which will be like, I don't know, some will be OS and wrapped as an order will be like, I don't know, USDC and USDT, right?
They prefer this kind of like environments. And what they have been targeting, I are super high, like there will be like around
30%.
But I feel like most of the power users, they go for like, they're happy with 15% because
they know that whatever is like a little bit above that, it's complicated to be maintained.
And also like, yeah, because it's not very sustainable. And I feel like this is the part that I really
like about the concept of a UTE forwarding
and what we have been doing is that we allow protocols that
want to pair with us.
And we continually redirect the UTE
to incentivize liquidity on the pool.
So I think this is like one of the interesting parts
that allow protocols to deploy
and not caring anymore in the future.
But yeah, that's just for me.
Yeah, that's great.
We'll go with Jeffrey too.
Jeffrey, you wanna chime in on that?
Yeah, I totally agree with Rafa.
Typically, you know, yields obviously look really attractive
when they're in the triple digits, sometimes even to the, you know, yields obviously look really attractive when they're in the triple digits, sometimes even to the four digits, but really that's just not long term.
It's just not sustainable long term, but I understand why people go into these pools
and farm the yield, but ultimately what sticks around long term are those pools that offer
a balance between sustainability
and risk mitigation.
So we typically see a lot of LP deposits into blue chip stable pools.
We'll see some into correlated pairs, like liquid Sagan tokens.
And then the short term gains could be had there from those high volatility pools that
are heavily incentivized.
But, again, ultimately, long-term LP profitability comes from having that sustainable liquidity
where I like to think of it as like a curve, almost like a supply and demand curve where
you have liquidity incentives that attract
the yield, the deposits that is, and then at a certain point when there's enough liquidity
in the pool that is generating yield, the incentives can then dry up and then that's
when you reach that equilibrium where you're targeting that 15%, 20% APY.
Yeah, that makes a lot of sense.
We'll dive in more on efficiency and stuff like that.
For Euler, I have a, Michael, this question is more tailored to Euler.
What sort of incentives are streaming to grow liquidity and how do you choose where to allocate
those incentives?
Yeah.
I mean, when we launched, we had a few different types of incentives.
We've brought some of our own incentives over. When we launched, we had a few different types of incentives.
We brought some of our own incentives over.
We bridged some.
We've got a token called reward oil that we bridged over, which has gobbled up very, very
quickly, actually.
We also received a generous grant from the Sonic guys.
So yeah, they've been helping bring incentives as well.
Obviously there's a mixture of points and things
that are coming through. There's organic yield from a variety of these assets, ultimately bringing
sort of native yield, intrinsic yield to the markets as well. So it's a real mixture. And
it's quite nice when you first launch, you absolutely need some form of incentives,
because I think it was Rafferty saying you need to solve this big some form of incentives, because I think, was it Rafferty saying, you
need to solve this big chicken and egg problem, right?
If you don't have the liquidity, then you don't have, there's nothing really for anybody
to do.
So getting past that sort of initial hurdle and reaching escape velocity where you can
then create a sustainable market, I think is really key.
And yeah, hopefully we can see that the oil has probably already achieved that at this
point.
Now I think we've got a really great foundation on which to focus on long-term sustainable
yields as things maybe calm down in the future.
In terms of where the incentives go, on Euler, we have a system where we have risk curators
who deploy their own markets.
Rather than on something like Aave,
where you have one big global market governed by
the Dow or Dow associated risk managers,
we have multiple different folks
that build markets on Euler in their own vision.
Some of those markets tend to be
more on the DGN end of the spectrum,
some of them are much lower risk.
Our view on this is that we're the guys that build the infrastructure and we're
not the experts on how these markets should be shaped. We don't know oftentimes what some
of these assets are or what communities want out there. We're not the experts in picking
and choosing the winners and losers in the market. The risk curators, we sort of outsource that role to the risk curators who tend to be a lot closer to the
communities and know what kind of trades people really want and what sort of risk-adjusted yields
they're looking for. So yeah, we've seen RE7 and MEV working on Euler building markets,
and they've both gone with slightly different strategies. There's a little bit of overlap. Definitely the Origin stuff has been quite profitable
and popular trade, it seems, with both of them. So, yeah. That's what we've seen so
far.
Yeah, that's awesome. It makes a lot of sense. And obviously, you guys have already talked
about a little bit sustainability, efficiency. So the next question is around that. So how
can we make liquidity more efficient in DeFi in general?
We'll start with Rafa too, and we'll go down the line here.
Yeah, thanks.
This is what I think is where we have been spending
most of our efforts and even thinking since last year,
which is exactly the part of the EU forwarding.
What we have been seeing is that a lot of people, when they were deploying on AMMs,
they were mostly pairing with an unproductive token.
So let's just say that you would pair it with USTC or wrapped S or something like that.
And it doesn't generate a yield.
It's nothing, right?
It's just like liquidity staying there.
So we were just like, OK, what if we can change this?
What if we can change the game on this level?
And that's where we really came with this idea
of programmable yield that we can move around the yield and do something different.
And I think the first use case that we thought was really pool booster where we would just
get the yield and put incentives in the pool.
And what is even the coolest part of that is that most of these, especially new AMMs,
when you put incentives, you have a very high multiplier against your incentive.
So there is a very big ROI.
And then you get even more yield on that.
And we have been working very closely with SwapAx and Ichi on this, to be honest, on Sonic.
And it has been great.
And just to give some numbers, we're forwarding around 650 OS
per day.
And most of it is going to the swap back to going to the VE swap
ex holders is in to in for them to put rewards in the pools.
And that's how I think we can make the liquidity more efficient, right?
Like, so when you repair with our token and it's a productive token,
so you you still get the yield, but the yield is not being linked to, I don't know, our bots.
So you get the 100% of the yield,
goes back as incentive to you.
And that's kind of our little solution for making liquidity efficiency in DeFi.
Yeah, it's pretty impressive.
I mean, when you explain it, it sounds complex,
but at the end of the day, the users are the ones that are essentially benefiting from it, right?
With the yield and the efficiency you're providing. We'll go with Jeffrey too,
chime in on that question. How can we make liquidity more efficient in DeFi? After you,
Jeffrey, go ahead and chime in as well, Michael.
You know, it's really just not about maxim it's not about maximizing fees in the short term,
right?
Like making sustainable liquidity is about optimizing capital efficiency, making sure
there's tokens available for swaps, and ultimately reducing unnecessary risk exposure.
So that's what we've done with Origin Sonic.
We've got about, I don't know, eight, nine million TVL
currently on SWAPEX through OS paired vaults.
And as Rafa mentioned, most of the OS liquidity
is paired with productive pairs, right?
And so when you have productive assets
that have deeper and deeper pools, you really ultimately
go back to the ultimate LP experience, which is being able to buy and sell your token at
the best possible price.
And so we really like to focus on the LP experience at SwapX and making sure that there is that
token that is available at that
available price and ultimately it's about making sure that this is also as
simple as possible for everyone. DeFi is incredibly complex with all the knobs
and widgets and gears that you could possibly do and you know we'll talk
some of we'll talk more about some of those complicated strategies in a bit
but ultimately, we really
believe that simplicity is key here.
This isn't rocket science.
We need to be able to make this very sustainable and efficient for people to understand what
they're doing and ultimately provide liquidity, know that their liquidity is being used productively
and not against them, and that they can ultimately feel confident to leave their liquidity in
there. That's ultimately how we build sustainable liquidity, and that they can ultimately feel confident to leave their liquidity in there.
That's ultimately how we build sustainable liquidity and that's what we're building at SwapX.
Go ahead, Michael. Yeah.
Yeah, I was going to echo a lot of the same points. I think it all comes down to capital efficiency
and there's a lot of advantages for building on Sonic, which make things, you know, just inherently more capital efficient, just the speed of the speed at which and the like improved UX experience, I think for DeFi is a real driver and increase of capital efficiency.
On OILA, we have this, you know, the typical way to, I guess, increase your increased capital efficiency when you have a productive asset and non-productive assets is to borrow the non-productive one against the productive one and then loop right.
And in the good old days of back on ETH mainnet in 2020, people used to just deposit the collateral
and then they'd go and do a separate borrow and then they go and do a separate swap and they would
loop up and you would see some folks doing this over the course of several hours very manually
paying hundreds of dollars in gas fees
to do this. And for all the time that that's taking and all the waste in gas fees and so on,
that's all coming out of ultimately making the system less productive overall. It's making the
whole thing less capital efficient. What's nice is that on Sonic, you don't have all those delays
and all the rest of it and all the gas fees. But then with oil on top as well, we have a system which makes it very easy to set up these kind of carry trades in a single
transaction. So we have a strategies page on there where you can see the maximum ROE that you can get
from a particular strategy. Some of the highest ones up there now are like 50%.
And essentially, you can deposit, view the strategy, take a look at all the
risks involved, see what your collateral exposures are, and so
on. And then if you if you like the trade, you can you can put
that on with the desired light leverage that you you're looking
for the kind of risk reward, risk adjusted reward that you're
looking for. And that's all possible in a single click. I
think just by overall increasing the
making the UX simpler and making it possible for people to put these trades on,
we're making the whole system more efficient and making the non-productive assets more productive
and making the ones that are already productive even more productive. So yeah, I think that's
the way forward and it feels like Sonic's properly built for DeFi in that regard,
unlike some other networks.
And for that reason, we're happy that you guys are fully integrated with Sonic, right?
Providing the capital efficiency and all these different ways to make DeFi a lot more simple.
I like the fact that you guys chimed in on the simplicity of DeFi.
It could be very complex in some of the actions, right? So thank you for putting the users in the forefront
I do want to take a time time right now to let her just to thank our audience right now listening in tuning in
We got Jeffrey from each II Michael from Euler Rafa from origin
We got a nice space here on DeFi and sonic obviously, you know, those questions were more towards liquidity, right?
I want to talk a little bit about APY.
So we'll get a little bit.
I want to get more of your personal strategies.
So what are your personal strategies
you're using to generate yield on Sonic?
We'll switch it up here.
We'll start with Jeffrey from EACHE,
and then we'll go with Michael and Rafa.
I think this just kind of rolls into the same theme
we've just been talking about here,
which is simple user experience.
You know, I just don't like managing a ton of things
and actively clicking around through things
four times a week.
That's just not me.
And I just don't feel like that's gonna be something
that'll be part of this crypto future, right?
We've built the whole crypto ecosystem
to sort of find ways to farm yield and make money
and make a lot of money real fast.
But at the end of the day, this industry was built so that it can replace the current crappy
financial system that we have.
And it's just about how you can generate yield in the most simple, easy way as possible
and taking away as many unnecessary
risks. I know that's not going to be a very sexy answer for a lot of people, but that's
really my approach is just low and slow, kind of how you cook your scrambled eggs.
There we go. Michael, you want to chime in?
Yeah. I mean, I'm personally not doing massive amounts of yield farming and so on.
I don't have too much time, but we do have what we do at Euler to make sure that everybody
at the company tests the app as we run an internal trading competition where we have
to eat our own dog food and put some of our own money on the line.
So right now I'm using a Pendle token to farm the WETH equivalent on Sonic.
So trying to maximize yield that way.
Awesome. Rafa, you want to chime in on some personal strategies?
I really like your approach, Michael. Maybe something different. I meant that origin too.
I like your approach, Michael, maybe something different
that I meant that Ardent too.
But yeah, again, I think listening to them,
because I felt like I was going to be the outlier here,
but I feel like when you are, I don't know,
building in DeFi and we are constantly trying to innovate
and doing all this stuff that we're doing right now.
It's hard to have the time to kind of be managing all the time and positions or looking at like,
I don't know, whatever new things coming up. I personally, I like to, I don't know, just LP,
especially with the EG Vault on SwapX because then I don't need to join Fane. So it's so easy.
And yeah, I feel like this is what I have been doing.
But we're constantly looking into order,
like how to do other stuff.
But I tend to be this kind of like you deposit and forget,
and then you come back, like I don't know, in a couple of weeks
and see what happened.
But that's the strategy that I do.
Yeah, thank you guys.
Yeah, I mean, myself too, I'm having a lot of fun at different ways to generate yield.
And there's a lot, there's simpler ways, there's a little bit more complex ways.
And that leads to my next question in terms of looping strategies.
We could start with you, Rafa, on this one.
What risks are associated with looping strategies and AMM liquidity
provisions?
And how does OS help mitigate these risks?
That's a good question.
I feel like looping strategies, it really depends on, for example, how it is configured,
like the pricing and oracles and stuff like that.
But yeah, like the biggest issues will be like you suffer liquidation, or you will be
needed to look very closely at the borrow rates, right?
Because they can spike, they can be misconfigured and stuff like that.
And then it can be complicated.
So I feel like doing any of these strategies, you need to be actively managing the position.
And I think the same goes to some AMMs, where you're constantly facing permanent laws and
or out of the teak and then you cannot
earn yield anymore and stuff like that. And then you can see like a bunch of like, people doing
some of this stuff. Like I think there was like the big article on how people were able to manipulate
like the pool and then move the teak and then like earn all the yield in this new tick. It was very complex, but it's possible.
And I feel like the way that we can help with OS
is really this part of auto incentivization of the pool.
Because if you depend on purely the trading fees of the pool,
it's something. But if you already know that one of the assets
that it's in the pool, it's actually earning you and incentivizing it. So just give an example,
right? If you have a multiplier, so for example, in SwapX, you would deposit, I don't know, $1.
in swapbacks, you would deposit, I don't know, $1. If the multiplier is 1.5 with the incentives,
you will get 1.5 back. So the yield even gets increased, right? And I feel like that's the
way that we can try to help. I'm still thinking about how the place that we can do with you forwarding on lending
markets, but maybe I'm not that big brain on this. But okay.
Yeah and anybody want to chime in, you know, Michael or Jeffrey on like the risk management
specifically with, you know, looping strategies?
Yeah. the risk management specifically with looping strategies.
Yeah.
Sorry, go ahead, Michael. Oh, yeah, thanks. I was just going to say, I mean, the looping strategies are hugely popular
in TradFi as well. In TradFi, sometimes people say it's like picking pennies up in front of a
steamroller though, because I think depending on, depending on where you are in sort of equilibrium, it can actually end up, you know, it's something that you really
need to be mindful of, right? Like you can loop these strategies and 99% of the time
they will be totally fine, nothing happens, right? But that 1% of the time can completely
wipe you out if you're not careful. So people definitely need to be aware of the risks of these strategies.
I think they can be extremely lucrative when they're managed well, but that's one thing
I suppose to be a bit boring here is to draw attention to the downside risk as well.
In terms of where that comes from, it can just sometimes be a little bit of volatility
that triggers a bit of a sell off in the market. And there are very things that, you know, lending borrowing market like managers
can do to guard against this. One of the things you can do is, for instance, use a fundamental
oracle where you're not essentially allowing small price movements to impact the stability
of positions, right, which is generally good for the borrowers and actually good for the
lenders too, a lot of the time, because if borrowers get liquidated, that
tends to drive even more volatility on swap markets, which can ultimately end up in big
market shifts and eventually even bad debt.
Using those kind of oracles can be good.
Of course, they have their own.
There's no free lunch.
If you use a fundamental oracle, that kind of push that bubble under the carpet to the other side of the room where then there's
other issues. But yeah I think there's, there are quite a few risks but they're things that people
can manage on landing markets as long as people understand the systems and understand what's
going on. I think it's all good. Ultimately, over-collateralization is a really important
factor here. How over-collateralized are the markets? If you have massively high LTVs,
then that's really what puts lenders at risk ultimately, is that there's a chance that
one of these volatility events can spill over the allowable boundaries, I guess, built into the system.
So I'd say it's on the risk curators, ultimately, of the lending markets to configure things
in a sensible risk-managed way.
Yeah.
So, piggybacking off of Michael, so in the LP experience, you go in and you stake an
asset and you get the liquid staking token or you supply an asset, you borrow another and then you want to earn yield on it.
So you'll go to an AMM to earn compounding yield on top of that.
And so the risk on the AMM side is that, of course, the asset that you borrowed now, the
price is no longer what it used to be.
And because of that, the price in the pool
itself has shifted, which could negatively impact liquidity providers.
But one of the things that we do at SwapX to make sure that liquidity providers are
at the forefront of what we do is we essentially are able to see when a price moves one way
or another due to this market volatility or market sell-off in the
scenario that we've been referring to.
Our liquidity won't chase that price.
Our strategies are automated, but we don't just follow any price as it moves.
The vaults actually know that when you deposit liquidity into the vaults, it centers around
an actual peg.
Now, we work with partners all the time to make sure that the pegs that we're setting
is what we expect and what we need to have inside that pool. But if the peg breaks in the pool,
of course your assets will all be converted to another. But this is usually,
it'll usually balance back out once the market reverts. But one of the risks associated with
this is that if you then chase that new price or that new peg, you're going to be selling assets
at a huge loss.
And so the strategies that we've got baked in for LSTs and stablecoins in particular,
we don't chase those broken prices.
And so unfortunately, sometimes that will result in not being able to swap for one asset
or the other in that pool.
And so the swap experience on the AMM side suffers a bit.
But again, our core focus is making
sure that the liquidity provisioning experience is as profitable as possible.
And that's why we don't go and we just move around liquidity and our vaults have that
automated check to make sure that it's not following those broken prices.
Pretty impressive.
And I think you guys touched on making sure, you know, it's clear that when you do these
types of deposits, you have to actively look at it.
Obviously SwapX and what you just mentioned right now, Jeffrey, is kind of mitigating
that, right?
And then you guys all touched on that.
And that's why it's important to check your health rate, especially if you're lending
and borrowing, to make sure, worst case scenarios you get liquidated.
So thank you guys for sharing.
You guys touched a little bit, my next question is around more the incentivized markets.
You guys touched on it a little bit early on in the conversation, but I'll ask it a little
bit more clear so you guys could touch on it.
So how will incentivized markets produce sustainable APYs once incentives stop streaming?
We'll start with you, Rafa.
Yeah, I feel like, I don't know if some of them
will stop streaming, but I feel like they will,
they maybe will get to one to one or a little bit above one,
but I feel like that's the maybe equilibrium
on the ROI of the incentives.
But I feel like a key aspect of that is like the solution
that we are trying to offer to some protocols
where it's not their yield anymore,
it's not their incentives,
is the pool tokens that are auto incentivizing the pool.
Right.
And I feel like this is a, this is where we're starting to play a bigger role.
And we're trying, we're trying to prove that this is a good direction.
So like, for example, what we're doing right now in Sonic is that we are redirecting the native
API of the staking yield as incentives to the pools, right?
So it's just increasing yield for everyone.
I feel like this is the part that I like about this project.
Yeah, that's it. I think if you go to the fundamental
question, where does the yield come from? Because that's really the heart of it. If there's no real
yield, then things don't exist over the long term. But where does the real yield come from?
Well, it's the compensation you get for taking risks, right?
And so long as there are genuine projects
with real utility here,
like for example, on the staking side,
you're getting compensated a yield for staking
and providing a service, but that service costs you money.
It takes time and energy, service, but that service costs you money, it takes time, energy,
effort, resource to put in, there's some risk involved if you get slashed and so on. So as long
as there's real people putting real resource into stuff, there will always be yield because it's the
compensation you get for risk. And wherever there's yield, then comes the potential to
effectively to leverage that.
And when you leverage up, you leverage up on both the risks and on the reward side of
the equation.
So I'm pretty confident that, yeah, given all the opportunities and all the people building
on Sonic, that there's a lot of real sources of yield here aside from the initial points and things that you might get
to help bootstrap things.
And so for that reason, I'm very confident that, yeah, lending and borrowing on Euler
will be a big thing for many years to come.
The question, yeah, I suppose is, can it be made about the sustainability of rewards and
so on?
I think we discussed earlier,
you absolutely have to reach escape velocity
and make something useful in credit markets.
You absolutely have to provide these incentives early
on so that you can solve this chicken and egg problem.
If there's no deposits,
then borrowers can't do anything.
If there's no borrowers, If there's no deposits, then borrowers can't do anything. And if there's no borrowers,
then there's no reason to deposit.
So you have to sort of breach that some kind of threshold
and who knows exactly where that is,
but there's some threshold of baseline liquidity
that's needed to create a marketplace
where lenders and borrowers can find one another.
And once you've reached that,
then it's up to the organic,
the real organic yield to sort of take over
and drive the markets.
And ultimately you just have two different types of people
and two ends of the spectrum against one another,
from passive people looking for yields,
ultimately to the borrowers who have some reason
for wanting that liquidity.
So yeah, overall, very, very confident
that things
will be sustainable going forward.
Not too much more to add over here other than incentive-driven liquidity is not sustainable
unless the underlying market has strong demand. If there's no demand for the market, those
rewards when they dry up, liquidity will just flee. Happens all the time.
So it's really just about finding that real yield and making sure that there is overall
profitability once these rewards start slowing down or completely dry up.
And so this real yield on the AMM side comes from auto-compounding fees.
The simple explanation is you put your liquidity into a pool,
your liquidity is used in swaps, the swaps generate fees,
and in our case on Swapx, each of those fees auto-compound
right back into your position.
So there's no active management,
there's no need to do anything with your fees,
you just set it and forget it.
And the focus again is on overall LP profitability.
So part of the strategies that we run as well,
I mentioned earlier that we have our LST strategy,
our stablecoin strategy, those are bucketed into one.
The other strategy that we run
is what we call inventory-based rebalancing.
And that focus is around a single token deposit
that we know that that's,
because that's what you deposited,
that's what you want more of. And that's what you want to have your return
and so as you have to supply on different AMMs, you know both tokens and find the right ratios and
Ultimately, you know swap to get them if you don't have it on swap X
It's just one token one deposit and now your token starts as 100% of your deposit
But now let's say the price moves
into the liquidity that you supplied.
Once it passes a certain threshold, which is different on every single pool, that liquidity
will then get moved out of the way.
And it'll say, you know what?
Too much of the liquidity that's been deposited has been swapped into the other.
It's time to now refocus on LP profitability.
And so through these adaptive rebalances and changing the way that the liquidity
is structured, again, always keeping LP profitability in mind, we're able to create that real profitability,
that real yield that we're talking about so that when farming rewards and incentives do
dry up, you're left holding more of the tokens than what you started with.
Awesome. Thank you started with. Awesome.
Thank you, Jeffrey.
I think we're going to probably wrap up here in the next five to 10 minutes, but
I want to get a glimpse into what's to come on Sonic for all of our projects.
So maybe starting off with Rafael to talk about Origin Sonic.
I'm curious what's in queue to improve liquidity or improve yield on Origin
Sonic, or maybe even on some integrations.
Yeah. Yeah, yeah. Okay, so this is a little bit of an out-toss.
But okay, so we're launching an AMO on SwapX to tighten up the liquidity of OS.
So this will be a good improvement there.
We'll probably have some deeper liquidity.
And this will help, I don't know, even lending markets.
Whenever you need to liquidate a position or things like that,
hopefully no one gets liquidated.
But in case you need, there will be enough liquidity there
for this.
And another thing that we are still thinking about,
to be honest, is like, yield forwarding,
open up a bunch of use cases that we are still listening
to what protocols want and how do they want to do that.
The most flexible way that we are offering right now
is just forwarding the yield to the multi-seg of the protocol and then they can build their own use case on this
But one that we have been receiving requests is about the buyback pool booster
So this would allow
the OS
the OS yield to, for example, buy, I don't know, SwapX tokens and then put the SwapX
yield to for example buy
token as incentives. This is one request that we have been receiving, so we might be doing
some work on there. But yeah, more to come.
Awesome. Yeah, I feel like liquidity has been a big theme of this space. And as we've learned,
liquidity is king. So I want to pass off the next question to Michael and Jeffrey. I'm curious what
assets you guys are prioritizing to deepen liquidity on next and just in general, what assets you're
most excited about on your platforms, what you see is growing, sort of an open-ended question, but feel free to take that however you want.
Michael, do you want to kick things off? Yeah, I mean sure, I think it's for us,
like I say, we tend to focus on the
It looks like he might have lost connection, Michael.
If you can request, I can actually invite you back up to speak, but maybe Jeffrey can
start off with his answer and then we can go on to Michael from Euler.
Yeah, absolutely.
There's a lot to look forward on SwapX and in particular, you know, we at Ichi SwapX pride ourselves
in bringing in top tier liquidity through big projects that want to come on board to
Sonic and so we have a lot of new partners there going to be deepening the liquidity
on SwapX soon, projects that have found Sonic to be a very attractive home. And just we look forward to ushering in more assets
as well as deeper markets.
So that's been a big thing of today's call
is how do you keep on deepening markets
and creating that real yield?
Well, it starts with bringing in top tier projects.
And so that is our focus and that's our prize.
And so we're keeping an eye on our prize here.
Love to hear it.
Welcome back, Michael.
Yeah, I dropped off.
Can you hear me now?
Yeah, loud and clear.
Okay, great.
Yeah, I'm not sure exactly what's going on.
I think you're mostly asking about the future
and like what's to come next.
So yeah, we've got a bunch of things happening on the Euler side,
trying to work more closely with a variety of other projects on Sonic so that we can
compose Euler with them, I suppose, to make even more capital efficient markets.
We've got a few new products coming to the ecosystem as well. So we've got something called Oil at Earn, which is effectively like an asset
management vault that allow strategy managers, I suppose, to help users that want more of a passive
yield experience that are looking to essentially just deposit into a vault and let somebody else
figure out the strategies for them. So similar to what people might recognize like
Yern or Metamorpho
would do over on Mainnet.
We've also been looking at
a native swap protocol built on top of Oiler Vaults as well,
which hopefully won't be too much longer
until that goes live.
And then hopefully onboarding a whole bunch of new assets as well. We'll be talking to folks that are
keen to see new lending markets sprung up on Sonic as well.
That'll be through the asset issuers themselves
or through the risk curators.
We've got a few more people that are looking to
onboard onto the network as well from that side.
Great, thank you, Michael.
We're coming up at time here.
So I wanna end things with just some closing thoughts
from everybody joining us here today.
We have a pretty big audience.
So maybe we can do a little pitch.
Why should the audience go check out your protocol?
Maybe you wanna call out a specific strategy
you find interesting.
If not, you can keep it general about your protocol or you can plug really anything you
see fit.
So I'll go ahead and start off with Rafael.
All right.
Origin is all about sustainable yield and liquidity.
I would just like to say if you are Polish on Sonic, you can feel free to stake your apps with us on OS
and enjoy the yield forwarding games that we're doing and especially if you're a protocol
reach out to us because we can probably build some interesting games. Yeah that's about it.
Thank you and I did pin that tweet on yield forwarding up at the top of the space.
So if you're looking for specific pools, you can check out that tweet.
But let's go over to Jeffrey next to talk about Ichi and Swapx.
Yeah, we're just incredibly excited to be part of this amazing growth on Sonic.
And we're, again, focused on bringing on board the next wave of liquidity
coming from other chains, coming from off-chain.
And we pride ourselves again on LP profitability.
And that is what our focus is on.
And that is what our focus will remain on.
And so again, really bullish on Sonic,
really thankful and happy to be here
with such great partners.
And that's all from the ICHI SwapEx side.
And that's all from the ICHI SwapEx side.
It looks like Michael may have dropped off.
So let's give him a second here.
He's back.
Welcome back, Michael.
You wanna plug?
I'm having real trouble here.
Yeah, I'm back.
I'm here.
Almost done.
Yeah, I'm hanging on.
So yeah, I would say I'll just follow on,
I guess from origin and say, yeah, once you've
got some Origin, bring it to Euler deposit as collateral, you'll find you can easily
amplify that yield by using one of the strategies on Euler by borrowing something that's non-yielding.
So yeah, come and check it out. There's a strategies page on Euler, lots of opportunities there, especially around Origin.
Yeah, just come and give it a try,
give us feedback in Discord
and tell us what you like and don't like.
But overall, yeah, really happy to be on Sonic.
It's been absolutely incredible
to see how fast things have grown for us, honestly.
So yeah, very happy to be here
and hopefully more and more users will keep
coming and checking out. Thanks Michael and thank you Luis for hosting. It's been an absolute
pleasure working with Sonic. Your community shows up each and every day and we love building on
Sonic. It's really been a pleasure. So thank you for that. I think we can probably wrap up here but
it's been a great space
Hopefully we have a recording so we can share some clips from this space on Twitter and we'll have to run it back again sometime in the future
No, yeah, of course
Thank you to Ryan for organizing and getting all these
Fantastic leaders and protocols building on Sonic and like you said our community is always really active
I mean we're Sonic is a DeFi centric chain, right?
We have a variety of things that people are interested in,
but DeFi is the core and it's just a pleasure, man.
So thank you all.
Thank you to our audience today.
And yeah, it is recorded.
So if there's any clips out there
that we would wanna resurface and reshare,
more than happy to, but it's been a pleasure today, guys.
Thank you all.
Cheers, thanks guys. Cheers. Thank you all. Cheers. Thanks guys.
Cheers. Thank you.
Thanks everyone. .
Host
Sonic Labs
from
Wrapped Sonic
