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Ungovernable Podcast – Ep.20
Recorded: June 12, 2025 Duration: 1:09:14Space Recording
Full Transcription
Thank you. Music Thank you. Thank you. Thank you. Thank you. Join the ungovernables.
No filters, no apologies.
This season we're cracking open Uniswap governance.
Welcome to a new episode of the Ungovernable Podcast.
Welcome, welcome, welcome to a new episode of the Ungovernable Podcast.
Today, we're joined by Dakota and Seth from Bunny,
one of the most exciting projects building on top of Univ4. We're Joe and Austin from Alpha Growth, your premier DeFi operations
and growth firm. Guys, what else should the listeners know about you?
Oh, yeah. Well, I'd say first and foremost, our focus is on helping LPs have a better experience. So hopefully that's getting some people's ears ringing out there. And yeah, on top of that, I am lead of growth over at Bunny. You'll catch me in the Discord more often than not.
And yeah, I think Zeth might be frozen still.
So I'm happy to kind of give an intro to him while he gets caught up.
Zeth is the man behind the scenes that's keeping everything moving.
keeping everything moving. He leads our front end development. And you will often see him doing
He leads our front-end development.
shadowy coder activities. He is a founder of Bunny. And I don't want to gush about him too much,
but is one of the most underrated devs in our industry, if I have to say so myself.
Yeah, actually, he might be back.
Hey, guys. Sorry, Lag Spike. I'm happy to be on here. Yeah, I'm one of the founders of Bunny and do a lot of the front end dev work and making sure contracts get hooked up to user experience.
I appreciate the intro, guys. I'm kind of curious for you, Dakota, what really drew you
into the world of crypto and ultimately stepping into DeFi? Oh, what a question. Okay. Well,
I got into crypto after being short the stock market right before COVID started.
the stock market right before COVID started. And so I moved from being short to trying to look for
the fastest horse in the race, right? The timing just couldn't have worked out better. It got me
into Bitcoin and pretty much right away, the degenerate in me saw, oh, wow, these things trade
24-7. And so I started digging into that more and more. As I got further down the DeFi
funnel, I found this really cool project called 88 MPH. And like, I always want to bet on myself,
right? Like, I want to be involved. And I messaged one of their founders, and he was crazy enough to
let me help.
He basically told me I could start by answering questions in the Discord, which I now know is like, you know, the most basic activity you can possibly do.
But I took it really seriously and didn't let a question go unanswered that, you know, even if I didn't know the answer, I was going to go try to find it and just grew one day at a time with these guys. And yeah, I mean, it's huge takeaway in DeFi that if you work, you can, you can do a lot of cool things. Yeah. I always,
always find that it's super interesting too, because you get protocol aligned, right? From
the get go, when you're answering questions in the chat, you get to learn so much about what
folks are building on the team. And then when you're integrated, it just makes a smooth experience for everybody.
And you all have those incentives aligned to,
to make sure you're,
you're fruitful in your endeavors.
Yeah.
If you didn't,
if you didn't cut your teeth as a discord mod,
are you actually in deep?
exactly.
Yeah.
I think,
I think so.
It took me a while to be able to accept the risk, right?
Like once you start understanding, okay, this can go bad,
you enter this dark place.
But after you move out of that stage
and you see the upside that comes with DeFi,
I think it's kind of hard to ignore after you see it.
So yeah, I think I would be involved.
There's a whole lot of potential.
Seth, how did you go from economics to smart contracts and front ends?
Yeah, I've been interested in crypto for a long time.
I got introduced to Bitcoin probably in like the 2012, 2013 timeframe.
Basically started dollar cost averaging in from 2015 onwards.
And then did an AI startup, which is probably about five years too early,
which is effectively the same thing as being wrong.
And kind of got my interest re-peaked in crypto kind of at the tail end of DeFi summer.
Like Compound was my introduction to the world of DeFi.
You know, started learning about things like Uniswap and I just went down a rabbit hole.
Like I'm still in it. I can't get out of it. I
just like consumes a hundred percent of my brain space right now. And that started, you know,
COVID as well. And kind of like Dakota got introduced to it via the 88 MPH product.
Loved the idea of fixed yield. There was like a lot of speculation in the product itself.
People loved it.
It was growing.
And like Dakota, I kind of just reached out and was like,
hey, do you guys need any help writing code?
And they started sending me like project work slowly.
That just built up over time
until like we just rewrote the entire
product for like the next v3 and it's kind of history from there.
Was there ever a moment that either of you came to of this whole thing is broken
let's go fix it? in terms of the product itself
or just like the system
the system
yeah
from my perspective
I think it's still broken like when you have
a Chase bank account or
a Bank of America account and your
savings account pays you like 0.008 and you can earn
three percent on compound uh it was just like well like what what is going on here because
the existing system is just screwing me and defy is not
dakota anything to anything to add there?
Oh, man. I could kick the tires on this topic for a while.
I'm going to say that there's clearly plenty to get fixed,
and I hope that I can make a little impact on that.
Yeah, and we're creating more and more problems every day, right?
But high level, I think we've we've done some pretty cool things, especially to to limit the size of the average savings account is the that's the end goal.
And to maximize the supply on compound and these other money markets, I think is a pretty solid goal.
in these other money markets i think is a pretty solid goal so walk us through go ahead seth i was
going to say the space just like is hyper focused on all these like problems that we experience and
they certainly are there i think what we sometimes miss is that none of these problems would exist
without kind of the success we've had in the last few years like if most of the things that we're
talking about now weren't even problems
three years ago so i think we need to kind of reflect on how we've grown as an industry and
what kind of good things have come out of it thus far to get us to this point and not hyper focus
on the bad stuff i heard an awesome quote the other day from an old friend she said i miss math problems with answers and i think uh i think the crypto space is very
good at um answers looking for problems right but to your point i think we have evolved tremendously
and and uh and we're only gonna we're only gonna keep cooking and as the ball rolls we break new
things and new things will be needed to be fixed.
Yeah, undoubtedly.
Let's jump over to Bunny.
So Bunny, I remember Bunny early on, very cool concept.
And now we're at V2, yes?
Yeah, that's right.
So tell us, give us a TLDR on V1, the problem you guys were solving and what you guys, what kind of success you had?
And then we can talk about V2 and how it's leveraging V4.
Yeah, I can take this one, Dakota.
timeless and you can kind of think about timeless similar to pendle although you know you can have
So Bunny kind of started out as a completely separate product called Timeless. And you can kind of think about Timeless similar to Pendle.
this concept of of yield tokens where you're splitting the yield into kind of a fixed and
variable amount i suppose um the difference between pendle and timeless was that while pendle has expiry dates, Timeless didn't.
It was just perpetual yield token protocol.
And it worked pretty well, but we've kind of failed to generate interest there
because a lot of the Pendle success kind of stems from point speculation,
at least that's my opinion.
And because we don't have fixed expiries,
nobody could do that with Timeless.
But all that aside,
Bunny was kind of born out of necessity for the Timeless products.
We really needed a way to incentivize liquidity for our yield token pairs on Uniswap V3,
and there wasn't a really good way to do that.
So Bunny basically started as basically a curve-style vote lock token
to incentivize liquidity of the gauges for our own yield token pairs.
I mean, that's why we built it, and that's why it existed in its v1 form.
I mean, that's why we built it, and that's why it existed in its V1 form.
We kind of quickly realized that people wanted the v1 bunny product more than they wanted
the Timeless product.
They wanted this gauge system on top of Uni v3.
And so we really leaned into that concept for a while.
I think there's a lot of problems with gauge systems and vote lock tokens,
but it kind of showed a spark of interest from our community
and attracting new community members.
Once Uniswap kind of announced v4,
we realized pretty quickly that this is a dev platform,
and it really opens up the design space for DEXs.
And we were kind of in a unique position
where we're already building stuff on top of Uniswap.
We're really familiar with the code base and how it works
and have contacts within the ecosystem
and decided it would be a good idea for us
to build a really advanced DEX
with a bunch of different features
and try to be the first one to market on top of uni v4 and that leads us to bunny v2 and where
we're at today and you guys have had a pretty seamless transition at least from the outside
and i think have captured a lot of early success. I think one feature that you guys have
that I'm super excited about is rehypothecation.
Would love to hear your perspective on rehypothecation,
maybe just like a TLDR,
and how that fits into the larger picture for Bunny.
Yeah.
Well, for those who are maybe unfamiliar with the term,
rehypothecation, at least in the terms of a DEX,
would kind of mean if you have liquidity
that's not being actively used to process swaps,
for example, like a full range,
you need to be two-style position. Most of the liquidity is idle and being unused. being actively used to process swaps, for example, like a full range Uni B2 style position,
most of the liquidity is idle and being unused. We would just take that idle liquidity and
rehypothecate it to a money market like Aave or Compound or Morpho or Euler, well, I'm just naming
people, and let the LPs earn yield on that idle liquidity.
And depending on the asset pair that you're, you know, thinking about or using and where that
idle liquidity is being re-hypothecated to, you could, you know, double, triple, 10x the yield
that LPs see if they were only earning fees from swaps.
So it can really juice LP yields pretty dramatically.
Oh, yeah. I feel like the efficiency as well, too, right?
You have oftentimes a lot of liquidity in either direction
that could be used a little bit more appropriately,
whether it's you're not in the
right ticker, not in the right range for a DEX. And then on the other side, if you're providing,
you're lending out on a Lend and Borrow, you could be earning a little bit more yield
if you're able to jump back in on those swaps to effectively earn more yield.
to jump back in on those swaps to effectively earn more yield.
How do you guys see this change in the game
for liquidity providers?
And will we be seeing more of this in the future
as DeFi evolves?
I think it's table stakes at this point.
If you're not offering re-hypothecation to your LPs,
you're gonna lose.
Like you see this with Balancer V3,
like they have a re-hypothecation component for their LPs.
I'm not exactly sure how it works under the hood.
The way Bunny works is you can re-hypothecate
to any ERC 4626.
So we're built on top of existing standards
that most projects use.
I think if you're just not going to offer this,
you're an inferior product.
I think that's a good way to look at it too.
Especially if you're going to generate more yield,
create more capital efficiency, put idle liquidity to work,
you're in the right place.
When it comes to your other features for Bunny, what are you guys most excited about that you're cooking from your side?
I think everyone probably has a different answer depending on what they care about most. kind of shape-shifting liquidity is the most interesting, where you can kind of pre-define liquidity curves
for, you know, the entire pool.
And that curve can be updated and changed over time
based on different parameters.
For example, Oracle prices or, you know,
deviation from the time-weighted average price
and all kinds of things where maybe you have
a uniformly distributed liquidity curve
and as the spot price of the pool approaches the peg price,
it kind of concentrates it more around that peg price
all happening autonomously.
You can do the same thing for, you know,
a Uniswap V4, V3 position,
but you have to do that all manually.
And Bunny can just do that automatically for you.
You deposit and let the pool do its thing.
Wow, that's super exciting.
What about you, Dakota?
What's your perspective on that?
What are you most excited about for Bunny?
So I'm going to start by saying those are, you know, he took a really good one and
Re-hypothication is already a really good one. So Bunny has like a ton of different levers you
can pull to do cool things. Dynamic fees is another really interesting one that I'm excited about.
Essentially, you can set the fee low to be competitive in an environment where
impermanent loss isn't going to be as big of a problem and then when volatility occurs
you can get paid more for that it creates a little bit for me it's it's easier to add
liquidity in a situation like that where you're kind of hedged a bit.
Yeah, it sounds like you guys are really cooking up a whole suite in terms of V4 hooks and all the possibilities and capabilities there. Real quick, Zad Dakota, and you were saying how
this rehypothecation feature is going to enable two, five, ten times the fees essentially that you can generate.
What does that look like in APR terms? If I'm just a liquidity provider looking for, you know, bottom line yield, what are we talking about on like a USDC, USDT pool
on mainnet or Unichain or something like that? What kind of, with using bunny rehypothecation,
what kind of APR could I expect? Sure. So just to simplify it as much as possible,
you can kind of think of a USDC, USDT pool that's maybe split 50-50. So 50% USDC, 50% USDT.
And let's say we send all the EIDL assets to Aave, for example. The rates on Aave today are like
3%, 4%, 5%. Let's just say they're 4% for both assets, just for ease of example.
they're 4% for both assets just for ease of example. We take about 90% of the assets in
the pool and send them outbound to ABE. So if you're gonna earn 4% on both of those assets,
you're maybe gonna get 3.6% juice in yield just from sending those assets to ABE.
juice and yield just from sending those assets to Aave. And that's on top of all the swap fees
you're going to earn. So if we need to withdraw assets from Aave to process swaps, we're going
to do that just in time to facilitate swaps like the assets were held in the pool to begin with.
It's very cool.
So I don't know what the yield is on that kind of pair on Uniswap today,
but 3.6 to 4% extra sounds pretty good to me.
It's kind of interesting.
I remember taking some supply chain logistics courses back in college,
and it's kind of funny how like all of the inventory management optimization is pretty much what the liquidity ecosystem is evolving into. Like the word just
in time, right? That comes from like an inventory management strategy to have perfect efficiency of
your inventory and your cash flows and your balance sheets to make sure that you can deliver,
but you don't have as much, you don't have a lot of idle inventory when you could be putting that your inventory and your cash flows and your balance sheets to make sure that you can deliver,
but you don't have as much, you don't have a lot of idle inventory when you could be putting that capital to work elsewhere. So sorry, quick little aside, I digress. While we're on the topic of
buzzwords, talk about liquidity density functions, because that was a new one for me. I'd love to
hear you guys explain a little bit about that.
Yeah, liquidity density functions are just pieces of code that define the curve of the liquidity.
So for Unisop v2, for example, that would be a full range uniformly distributed liquidity density function. The same liquidity density function can be used for a uniformly distributed
position that is concentrated between you know one and two dollars. There are different types
of liquidity density functions that we can use as building blocks to build more and more complex
liquidity density functions. This might be like a geometric curve where it's
concentrated on one side of the position and and less concentrated on the other
side of the position. You know something like you're providing a lot of
liquidity at the peg price for a stablecoin and less liquidity if the
stablecoin depegs for example. All of these are meant to be
building blocks so you can kind of combine liquidity density functions with other liquidity
density functions to create more and more complex liquidity shapes and curves that can change over
time or with you know different, like I mentioned earlier.
So that's what we think of as liquidity density functions. And yeah, it can get as complex or as simple as you'd like. Yeah. I mean, we don't want to get too, too technical. I'm sure we could go down a rabbit hole no pun intended there for bunny uh and deep
dive um i guess from your perspective zeth like what's important i think as we've moved from like
v2 where it became super easy to like be a liquidity provider even for like retail how
how important is liquidity density functions for like now as not an experienced user coming into Univ3 or Univ4?
What's important for them to note and what's important for them to take away even if at a high level?
Liquidity density functions are really meant to abstract away a lot of the complexity of effectively being a market maker for your average DeFi user.
I'm probably mid-curve. I don't have the knowledge or the capacity to really analyze a specific token pair and provide liquidity in a really tight range and be
profitable all the time like it's it's really time consuming and expensive to do and most people just
don't have the the skills to do it liquidity density functions basically just outsource that
type of expertise to the protocol or a curator who creates their own LDF. So you as just your average
user can deposit liquidity just like you need to and get all the benefits of a really complex
liquidity market making strategy. Gotcha. So it's almost like an ALM,
in a way automated liquidity manager in that fashion. Yeah, exactly. Except it's all on chain. Gotcha. Okay. Very, very interesting.
For like an average user going to Bunny, like what types of pools would you point them towards if
they were, you know, maybe a little bit experienced in DeFi, but still relatively new?
I think obvious answer there is probably stablecoin pairs.
BUNNY is part of this Uniswap Foundation incentives program where we have a USDC-USDT pool that's
being incentivized by the Uniswap Foundation on Unichain.
This provides liquidity in a really tight range and concentrated around the TWAP price of the pool.
I would suggest people kind of check that out because we send idle assets outbound to go earn
extra yield from various places and you get all the benefits of really tight liquidity provision
as well without the scary risks of things like impermanent loss.
So I would check out stablecoin pairs to start
and slowly branch your way out to maybe LST pairs
and eventually kind of the meme coin pairs
that could be ultra volatile.
Are there any double dip opportunities right now? So for instance,
the concentrated liquidity that's being incentivized by Unichain and then also the
rehypothecated idle assets that are being supplied on a money market, is that also being incentivized to where you're able to earn uni rewards on two different fronts?
Oftentimes, yes. The logistics for actually getting those rewards distributed correctly
can be a little confusing. I don't want to say too many bad things about different projects
that are popular, but a lot of these incentives on money markets like Euler and Aave,
they use off-chain mechanisms like Merkle or their own Merkle Trees to distribute these rewards.
And that doesn't fit really well with the fully on-chain system.
doesn't fit really well with the fully on-chain system.
So the short answer is yes.
Like if Morpho vaults are being incentivized
and you're using those, like you will earn Morpho rewards.
We still need to connect the dots
to make sure our LPs are getting those Morpho rewards.
Sure, I understand.
All right, so you guys were one of the first
noteworthy hook projects.
And there's been quite a bit of talk around how each hook is essentially just a new protocol in a lot of ways.
At least it shares a lot of the same struggles and tribulations as launching a new protocol.
First of all, would you guys agree with that? As a team that's actually
built one, would you agree that building a v4 hook is essentially the same thing as launching a new
protocol? I think yes and no. Without getting too technical, the Uniswap v4 codebase allows hooks to
use the default Uniswap swap math, or you can be what's called a no-op hook,
where you ignore the Uniswap swap math
and define your own swap math.
In the case of the default of using Uniswap v4 swap math,
I think you are not your own dex.
You will get native routing through the Uniswap front end,
and it'll be a lot easier for aggregators to pick you up
because you don't have a lot of custom swap math and logic
that they need to figure out.
For Bunny and for other no-op hooks,
it is like defining your own decks.
You need to do all the groundwork for aggregator integrations and routing and getting swappers to actually swap through your pools.
That's been the biggest challenge for us, for sure.
And I think it's going to be the biggest challenge for hooks, broadly speaking, in the Uniswap V4 ecosystem.
What aspect of building and launching this hook
was easier than you expected it to be?
It's okay if it was all really hard.
I feel like it's been a grind.
It's been rewarding and we're taking these things down.
And I think we're going to, it's like stealth mode, but we're live because a lot of integrations,
he was talking about the aggregator stuff, they're slowly coming online.
But we're also seeing that in CoinGecko, CoinMarketCap, DexScreener, all those one by one have to be individually done.
Right. And so it has it has been a grind.
And, you know, it's going to be exciting to see these kind of come on and wave after wave kind of surprise people that that's their main way to get information.
Oh, look at Bunny there. They
actually are doing this. When you see you're not on CoinGecko or the data is not showing up on
DeFi Llama properly one day, it's easy to overlook. But then when you dig into the details and you
realize that, in fact, the data is much better than what it currently looks like.
It's going to be good in a lot of ways, but it is a grind.
I can't think of anything that's been terribly easy.
We've gotten support from the Uniswap
community, greater community, probably more with our V2 than our V1,
which has been really cool.
It's probably the easiest thing I can think of.
I will say from a technical perspective,
the v4 singleton architecture has been really nice.
It makes things really easy to deal with
when you're kind of doing, you know, accounting on our end
is just a single contract you have to interact with and
keep track of versus a bunch of different pool contracts um and the gas costs are massively
reduced i know like hayden and others like constantly are harping on this and it is
definitely true like i don't think people give them enough credit for what they did on the gas
savings fronts and maybe seth too if you could give like a little TLDR for listeners what the singleton architecture is.
Yeah, sure.
So I guess maybe let's start with V3 and how V3 works.
V3 basically had a factory contract where if you deployed a new pool, it would create a new contract
for each pool that you would need to keep track of and interact with if you wanted to, you know,
swap through a pool or deposit liquidity into a pool. And this changed dramatically with the with
v4 and the singleton architecture where instead of a factory contract that's kind of generating new contracts for each pool,
each pool basically just has an identifier
and all of the assets for all pools live in a single contract.
And this just allows for a lot better efficiency
when it comes to moving tokens around
because you can just track basically transitory
storage slots for token balances for different addresses in the singleton contracts and then
settle everything up the end and it makes like multi-pool hop swaps a lot cheaper. It makes arbitrage a lot cheaper. It makes everything cheaper.
Plus you kind of have a significantly reduced gas cost for deploying pools,
which makes this just more accessible for people.
Gotcha. So it's almost like a master architecture where you're really interfacing instead of with
your V3, you're going toacing instead of with your v3 you're
going to be interfacing with dozens or hundreds of different contracts now you can interface with one
to get to those different contracts if i got that right yeah you can kind of i think the best way
to think about this is via flash loans for in v3 for a flash loan you need to flash loan assets
from a specific pool and you're kind of limited to the amount of assets in that pool for your flash loan size.
In V4, you can flash loan from the Singleton contract,
and you can flash loan 100% of whatever token you want that exists in this pool contract.
So you could have a thousand different USDC, USDT pools,
and you could flash loan assets from all 1000 of them in the same transaction.
Oh, wow. Yeah, I think that's going to make things a whole lot easier and a whole lot cheaper.
Do you feel that there becomes any security risk when you start talking about like v4 hooks i'm sure with all these
different projects building all these different v4 hooks do you worry like in the greater scheme
of things that there's going to be more security vulnerabilities when it comes to the v4 hook side
of things i think the answer has to be yes.
Each hook is going to have its own code that needs to be audited and it's going to have
its own security vulnerabilities.
I think we've already seen some hooks, v4 hooks get hacked.
Bunny also had a vulnerability in a previous version of our code that our third auditor
caught and we were able to fix just recently.
So I think you still need to do your diligence and get your code audited preferably multiple
times in order to avoid a lot of these worst case scenarios.
I think like all of the problems related to flash loans and, and market manipulation
can potentially get worse too, because you're just able to access such large pools of capital
in the v4 model compared to previous models that it could just unlock a huge can of worms
just because of the size that we're talking about. Yeah, and I think, like you said, too,
the design space with hooks is just so vast,
which is a benefit,
but also can be a little bit of a curse
when it comes to making sure
that all your ducks are in a row.
Yeah.
It's also fragmentary.
Like, you know,
with the Unisop V2, it's just a single pool. You you know with the uniswap v2 is just a single pool you know
you know what pool you're swapping through for a specific asset parent like i said there could be
a thousand different pools for the same exact token pair in the v4 model so liquidity just
gets fragmented like crazy yeah if you were going to redesign everything i think that's a good point
because like as joe was saying you have that cold start problem with hooks right and you have this fragmentation like if you were if you were
uni swap how might you design things differently with with hooks in mind
i think having a single pool for single asset pair makes a lot of sense but people want to
do different things with their positions.
So if each position within a pool could be defined by a liquidity density function and all of the swaps kind of go through the same pool,
you could have a really interesting design space from a position, like a user liquidity position standpoints while maintaining all of the benefits
of having that liquidity in the same place
and not fragmented across thousands of pools.
I would have moved in that direction.
Obviously hindsight is 20-20.
You raise a good problem though
that I think there's still some opportunity
whether that's going to be an aggregation layer or maybe otherwise.
Maybe we can solve the million dollar problem right now.
What if you've got a thousand different pools, let's just say USDT, USDC pools.
And each one has a different amount of liquidity.
Each one obviously has different knobs and dials that have been turned.
That's the whole point of V4 in the first place
is you can customize this, but with that customization,
you're jeopardizing liquidity depth.
So what would be a way that maybe someone's already doing this
or maybe that's the point that you brought up
about the aggregators. How can you visualize
all of the USDT, USDC liquidity in one go? Is that already in existence today? Is there already
a front end where you can interface with the entirety of the liquidity that exists versus versus just one by one in each v4 hook?
I think the answer is no.
From my perspective,
aggregators have been really slow on integrating Uni v4.
I know plenty of really large aggregators that still have yet to integrate unhooked
Ubisoft v4 liquidity,
which is crazy to me.
That should have been done on day one.
And for each hook, like bunny, you're going to have to write specific logic for the bunny hook
to have a visualization and understanding of all of the liquidity that sits in bunny pools.
visualization and understanding of all of the liquidity that sits in bunny pools.
So unless there's an aggregator that's really done the groundwork so far, I would shout out
like 0x. They've been really great on integrating v4 and v4 hooks really rapidly. This might not
exist today. And because of the fragmentation, i think all of these different pools that are
created via hooks or otherwise are effectively competing against each other even the pools
within bunny for the same asset pairs are competing against each other for the same
swap volume so may the best hook win yeah no may I think, yeah, with the rules of the game today, I think the only thing you can say is that, right?
May the best hook win.
But do you think that that's sustainable?
Do you think that that's going to be the most conducive path to a successful, sustainable ecosystem?
I think it depends.
Like, I know Unichain has this vision of being the liquidity layer for a lot of L2s, especially
if we get interop and different things on the L2 fronts. And in that case, because the gas costs are so low
and everything is concentrated there,
that maybe won't impact things too much.
But for a chain like mainnet,
I think a lot of this fragmentation
is just going to be bad in the short term.
And I don't know if it's solvable
by aggregator integrations. I think it's
just potentially worse for swappers unless there just emerges a really dominant hook or dominant
pool that's just obviously the best for LPs that all of the liquidity gets attracted to.
And of course you can also make the argument depending on which side of the field you're standing on, if you are trying to sell volatility and you're trying to create a lucrative arbitrage engine, if there are a thousand different USDC pools, then there's a lot of arbitrage opportunities, right? A thousand ETH pools.
There's a lot of arbitrage opportunities just within, you don't even have to leave
V4 and you can basically plug all of these things into each other, buy here, sell
there, buy there, sell here.
And I think that would obviously stimulate volume.
So the liquidity fragmentation, there is a strong steelman argument for why
that does actually help with the kinetic energy
of an ecosystem, right?
So I guess there is a silver lining to that.
I think you have to be careful with that
because we know that arbitrage is
or can be really bad for LPs.
And this is one of the reasons like V3 has been pretty terrible for your average LP
is because they're just getting rinsed by arbitragers.
And so I don't know if introducing more arbitrage than existed previously
is necessarily a good thing for LPs.
Potentially it's a good thing for Uniswap.
But yeah.
Yeah.
I'd like to, first of all, I love the word rinse.
That's phenomenal.
I'd love for you to speak a little bit more on that.
Cause that's, I know that I'm not saying,
Hey, arbitragers come here.
There's this opportunity that's just identified on chain.
They don't need me to tell them where to go.
And I think it's going to happen if the opportunity exists.
If it can't happen, it will happen.
If you don't mind explaining a little bit more about why it is that these V3 LPs are getting rinsed, so to say, and what that looks like.
Yeah, you can kind of think about it. LPs are getting rinsed, so to say, and what that looks like.
Yeah, you can kind of think about it.
Mainnet is probably the best example because the block times are slow, where, you know, on every block, you potentially have a pool price or an asset price that's 12 seconds out
that's 12 seconds out of date relative to Binance for example.
of date relative to Binance, for example.
And so some arbitrage is going to buy on Binance and sell through your Uniswap pool
and you the LP are effectively losing the difference in value.
You're basically just allowing people to trade at a stale price.
I think there's like a grand debate about this
with faster block times in the Solana world or on L2s.
Like does this improve the situation for LPs or not?
I don't know the answer to that.
I'm not an expert.
I'm not going to pretend like I do have the answer.
I do think what V4 does on that front
is allows developers like Bunny or other hook teams
that we know of to experiment with ways to mitigate that.
For example, in Bunny, you can actually
override the price of a pool for a swap.
So you could have an Oracle, maybe a Chainlink Oracle
that connects to a pool that says,
hey, only quote swaps at the price of the Chainlink Oracle.
And so you're probably reducing or mitigating
some of the arbitrage opportunity that can happen
by doing this.
I don't know if it's gonna be perfect or enough
I don't know if it's going to be perfect or enough to really make it better for LPs.
to really make it better for LPs.
I think that's a great way to look at an experiment with it too, right? Is there any
other ways in your mindset, like how we could protect liquidity providers? Because I know that
the big thing, even for V3 and permanent loss, especially was a difficult aspect for people to want to actually stay in uni v2 uni v3
implementation yeah i think impermanent loss is different like impermanent loss is a constant of
the universe when it comes to concentrated liquidity it's it's just unavoidable um
It's just unavoidable.
For other LVR mitigation mechanisms,
there are so many different designs
that are basically in the research phase right now.
There's very few implementations of things live in prod.
Things that I've seen are dynamic fee hooks
that adjust the fee based on the priority fee of the transaction.
So if you're an arbitrage, you're going to pay a really high priority fee to get your swap included first in the block.
The pool might charge you a higher fee when you do this relative to a swapper who doesn't care about their order in the block.
So there's things like this that can help mitigate LVR, which is loss versus rebalancing.
Bunny has implemented a specific design called auction managed AMM.
I can't remember who wrote the paper on this.
I want to say it was like Austin Adams or Dan Robinson or one of these guys basically auctioning off the right to set and
collect flop fees from a pool in exchange for paying rent LPs and what
this is meant to do is kind of kick off a bidding war where informed actors will pay up to the amount
of value that they're getting from swap fees. And the thought process here is that by introducing
this competitive mechanism, you can effectively return like 90 to 100% of the LVR back to LPs while still having kind of a profitable actor to make sure that this
happens. So those are kind of like the two design mechanisms I'm aware of right now that are being
used. I'm sure there's others. I know like Sorella has an interesting concept. I don't think they're
live yet. I'm really curious to see what happens once they do launch.
But yeah, I think the design space is really nascent and we'll see what happens.
And I'm sure we'll see a lot more solutions coming too.
So I appreciate Zeth for going down the rabbit hole there and doing a deep dive for all the functionality functionality functions for liquidity and what you guys
are doing there. I wanted to hit on growth for a little bit, maybe throw this over to Dakota.
How is Bunny looking at and tackling growth? Yeah, so these guys have made my life pretty
easy, right? Like I said, there's so many different levers we can pull to help the end user get the
product they want. From a protocol to protocol perspective, we can go in there with programmable
liquidity via these LDFs and help them solve any problems they have. We're just a hair too early.
As we mentioned, we just kind of started a reboot. So if you're listening to this,
check out our feed and you're going to see a lot of good examples of this coming out in real time,
hopefully. That said, rehypothecations, like the lowest hanging fruit, that one we can explain
pretty quickly. So how do you get LPs if you're not using protocol and liquidity? Well,
a lot of times you have to incentivize for that, right? Something like Bunny allow with
rehypothecation allows you to kind of get involved at a fair price, which, you know,
you spend a little bit for migration incentives in some cases to get people excited but we we get lps in the door and then we can use something like re-hypothecation say four percent
on ave to scale up lps without just destroying that apy you know it's going to take a lot of
liquidity and a pool to start influencing the apys that you're going to see for blue chip pairs on Euler, AVA, etc.
So that's probably the easiest example.
We also make things really simple for protocols with different things like flexible ways to add those incentives.
flexible ways to add those incentives. If you want to make a big number pop, you can set it up
in like a liquidity mining way that you would see normally 400% APY at launch that gets diluted
over time. But we can also hook it up where it's 4% fixed rate up to a certain amount of TVL. So programmable liquidity down to the very
last detail and adding more every day makes growth pretty easy at Bunny. Oh, I'm sure. So when it
comes to like having this flywheel and really retaining that liquidity, I know you said you're kicking things off with incentives to get that migration to happen. What's that next phase for
your flywheel look like to keep liquidity there? To keep liquidity after it's already been migrated over. I would say making sure that we have good curators for pools.
We have also kind of flipped things internally where we went from using a referral link program
to drive liquidity that way to more of a curator focused setup. I guess it's not live yet. So a little bit of alpha leakage there. But
if we build the pool correctly, it makes it a lot easier for the liquidity to stay there.
You have to, if our competitors are offering a better rate and security is a variable that isn't considered in this case, then we're in trouble. We have to
make sure that we're building good stuff so that people prefer us. It's really just a numbers
thing. I think if you're there to make money, let's make sure we're giving you the best option.
Yeah. I always feel like, I think somebody said to me once that financial products at the end of the day
are just yield and however high compared to their risk tolerance is the way you
want to be able to offer it. And you can outpace somebody in that direction.
I think with your rehypothecation, especially like you said,
low hanging fruit, it's almost the flywheel in itself.
So super excited for you guys to to continue
to have these partnerships and incentivize and grow that liquidity i did want to ask from the
uniswap side whether this dow foundation labs how do you feel like uniswap can help you know
whether this is bunny or other V4 hook builders grow?
From a growth perspective and being a relatively small bootstrapped project,
it's always nice to have co-marketing support. Making sure that we're getting new eyes on what we're building is top of funnel, easiest way to get reps in, understand what we need to change, understand what we're doing right. technical friction points related to aggregators. I think those two things really kind of open
plenty of doors to see which hooks are solving problems.
Do you guys have plans of a DAO or do you already have a DAO?
There's already a governance token that you can get VE Bunny.
What's been your experience with DAO governance?
Internally or externally?
It, um, chaos, chaos, right.
Chaos, right?
Um, it it's, it's been, it's been a learning curve for me personally that, you know, externally speaking, Uniswap's doing a good
job of getting reps in and figuring out what's working and what's not and helping us solve those
issues. It's an easy way to get paralysis by analysis. You jump into a new protocol and you want to get involved
with all these different governance activities
and it can get pretty wild.
From our perspective, I would say that
making sure you have good actors in your ecosystems
a high priority, especially for a new protocol.
We've had at least one or two different occasions where someone's come in and
potentially didn't have their goals weren't necessarily aligned with what ours
were. So it's going to happen.
I would say that's probably,
if you were building a new protocol,
that was probably one of the things I'd be aware of
from like a DAO perspective is
know who's growing influence inside of your ecosystem.
And how has it been having,
cause you guys are built on top of Uniswap protocol uniswap ecosystem whatever you
want to call it and then you have a you have an independent dow is there was there ever a world
where you guys thought about kind of creating more of like a sub dow i know that would be
arguably more chaotic in some ways but because you because you're so dependent on the platform itself,
was that ever a thought of yours?
That specific thing hasn't come up inside of our community. Our community does a pretty good job
of keeping up with what's going on over at Uniswap. Every day we do seem to become more and
more closely aligned with what's going on over there. So hopefully that continues and conversations
like that, we can get them in front of everybody and see what they think. And do you guys as a key
hook builder, are you guys pretty active? Do you have someone at Bunny who's
leading governance efforts over at the Uniswap DAO to make sure that your voice is heard?
So that probably falls on me. We're a small team. We have a lot of moving parts.
You know, we're a small team. We have a lot of moving parts.
We're, as we become closer and closer, more connected, I should say, with the ecosystem over there, we are paying more and more attention.
There's a proposal, I think it just went to snapshot, for a technical advisory board.
We would be a part of that.
So we're growing.
Would you say that you're, reasonably speaking, your voice has been heard?
Yes.
Good.
That makes me happy to hear because I know there's a lot of voices.
There's definitely a lot of people talking.
There's a lot of people talking and, you know out of 10, if it's important enough,
we can get feedback and get the ball rolling as needed. Sometimes it takes a little bit more work.
And I think that's part of what's daunting about another thing that's daunting about
governance in general is, oh man, who are all these people? I didn't
get a response on my question. What do I do from here? So yeah, we've been heard.
I think the technical advisory board is going to help a lot. We'll see.
And what would you say is the most controversial opinion that you have about V4 and V4 hooks?
And you're allowed to have whatever opinion you want because you guys are right there in the thick of it.
I think when you set back and you look at how things have rolled out, Uniswap as an ecosystem has a lot of moving parts.
you know, the, the largest group, uh, which is probably about as controversial as you can get,
like the just general, um, people watching from the sidelines, there's, there's been a lot of
push on like how the cadence of things have unfolded. Um, I think there's a lot of moving
parts and where we're going to end up is going to be a lot better than where we started.
And it might not have, it's been a little bit of a bumpy ride to get things up and running.
You know, I point back to the aggregators, right?
Like it would have been really nice to have those all up and running day one.
So it's been slower than I would have liked, but not from... everyone's excited. It's
like we're waiting for the lights to come on for the party. And just, I think it's getting there.
It's hook season, right? Yes, without a doubt. So now as Uniswap is more of a platform and an ecosystem than just a protocol, in the next 12 months, what would you say is your biggest wish for the Uniswap ecosystem?
want to see there was a proposal i mean i guess it was the the uniswap unleashed proposal uh
my wish is that their goals and that proposal come come true i i think if if they hit on and
execute on their goals um that's about as as much as we can ask for at this point. I love that. Well, guys, I appreciate you guys coming on.
Where can people best follow your work and best follow money?
Twitter. Twitter would be number one. You're probably going to get the information. You're
definitely going to get the information faster on our Discord. I know not everyone has time to be
in there, but making sure you're following us on twitter and turn on those notifications if you can because we do these
rush pools right where it's a fixed amount of yield up to a certain amount of tpl you you don't
want to miss that all right bunny.xyz be sure to check that out and that's a wrap of another
episode of the ungovernable podcast.
Guys,
I appreciate you guys coming on and joining us today and sharing your
insights for our listeners.
Don't forget to subscribe to us on Spotify and YouTube.
We're dropping new episodes every week.
Be sure to follow us on exit grow uni swap to stay updated.
This has been another episode of the ungovernable podcast.
And we are Joe and Austin.
See you all next week thanks cole thanks
on X.
Hey.
Hey.
Hey.
Hey.
Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. Hey. that zeth could come on that was that was nice just to listen to
i always like to hear him cook a little bit he was definitely dropping knowledge
um okay well while i have your attention uh well first off thank you for letting us on but um
aside from that i talked to venus i guess they're about to throw up four six two six enable contracts um so i i'm kind of trying to push them towards doing some sort of larger
incentive plan or at least being able to pitch something with this SUSD.
Is that what it is?
The Sky stable coin pairs.
So I'll keep you updated on that front
if they're willing to do something beyond like,
yeah, I think Euler will just throw incentives at it
at this point.
It won't be anything too crazy.
Yeah, keep me in the loop and then definitely
looking forward to because you said rebalancers go out next week is that i'm sorry now now i'm
lagging pretty bad what was that i was just saying rebalancers going out next week is that what you
were saying yeah so it start it started on unichain um I don't know. I don't think I have any new information on that. Next
week sometime, hopefully. Hopefully earlier next week, but not sure.
Okay, cool. Yeah, keep me in the loop because then we'll get those OP incentives going.
I'm looking forward to that. I think you guys are really driving up the scoreboard in terms
of incentives on V4 hooks.
Definitely number one.
Yeah.
Gotta keep going.
I'm definitely not happy yet.
We can do more.
Define never sleeps.
Yeah,
man.
Certainly.
You are the energizer bunny.
Somebody is.
I'm not.
But yeah, fellas, it's always cool know it's nice to see you man um if you guys are good i'm good i don't know how long we need to hang out for uh
solid mine has an error shown i don't know what's up with that but that's not your problem that's try a local thing um vicky are we good to disperse
no not really everyone's recording is still uploading
maybe i mean dakota if you just want to mute turn your camera off and
and buzz out then that's it should be fine i don't know if there's an issue here mine's saying
out then that's it should be fine i don't know if there's an issue here mine's saying
network connection lost please reconnect and try again
even though i'm still here i don't know vicky what do you recommend
i think we can like if you have some time to stay longer in the stream yard we can try that
have some time to stay longer in the stream yard we can try that because it
looks weird because all the time that we do the podcast after it I see the like
exact percentage of the recording uploaded or not and now I just see the
uploading like and reloads so if you have like some more time to stay here it
would be nice if not we can just hop off the streaming platform
and I will just do the post-production a bit later
when the recordings are processed by the speaker.
