The AB Newsletter is for informational purposes only. Do not construe any of the following as investment, financial, or other advice. You make your own decisions.
The AB Moonletter🚀 is a culmination of research & perspectives from the diverse minds of the AB Team. Ultimately our focus & mission is financial freedom. Letter #7🦄 includes:
Highlights:
Uniswap v4 - DeFi’s Super App?
TradFi Adoption - A Glimmer of Hope?
Maker DAO - Better Economics than Governments?
Altcoins: Buys & Watchlist
1. Uniswap v4 - DeFi’s Super App?
Uniswap is the brainchild of Hayden Adams who gained inspiration for the idea from one of Vitalik’s early posts about how to design a DEX on Ethereum. UNI is also currently Advantage Blockchain Fund’s largest altcoin position. Now the largest revenue earning app on ethereum has announced its vision for the next major update.
In 2017 Hayden had just been laid off from his first job out of college when he reached out to his good friend Karl Floersch (optimism co-founder) who was working at the Ethereum Foundation at the time. After some encouragement by Karl, Hayden decided to give the whole solidity thing a try.
Fast forward a year and Uniswap v1 was released in late 2018 introducing the x*y=k formula, followed by v2 in 2020 with slight improvements, and v3 ushering in a concentrated liquidity automated market maker model in 2022. Now in 2023 the Uniswap Labs team with help from the Ethereum community have released a sample codebase for Uniswap v4. The code is yet to be audited and deployed because Uniswap Labs wants to give the community plenty of time to test/audit and provide feedback for the code. This is very smart as it implies it is less of a product offering from Uniswap Labs and more of a decentralized community effort.
So what do we know about Uniswap v4 so far?
Hooks
TWAMM
Singleton Contract
Flash Accounting
Let’s start with hooks. The Uniswap team describes - “Hooks are contracts that run at various points of a pool action's lifecycle. Pools can make the same tradeoffs as v3, or they can add totally new functionality. For example, v4 will allow pools that natively support dynamic fees, add onchain limit orders, or act as a time-weighted average market maker (TWAMM) to spread out large orders over time.” Essentially hooks are plugins to create more customizability for developers.
TWAMM (time-weighted average market maker), besides being fun to say, is a new type of automated market maker (AMM) that helps traders on Ethereum efficiently execute large orders. As stated by Uni’s team - “It works by breaking long-term orders into infinitely many infinitely small pieces and executing them against an embedded constant-product AMM smoothly over time.”
Next is the singleton contract. This contract is where all Uniswap pools live and creates more efficient routing saving users an estimated 99% on gas costs! Woohoo!
Finally, we have flash accounting, which uses “transient storage” but needs to be added to the Ethereum protocol through EIP1153, which will introduce even further gas savings.
Something positive to note is how Uniswap Labs decided to release this code through a BSL license, which isn’t as restrictive as a patent compared to previous versions. To our understanding however this does still somewhat limit the ability of others to use/redistribute/profit off the codebase.
You can find a few solid video explanations of Uniswap v4 below:
Authors: UEV Guy
2. TradFi Adoption? - A Glimmer of Hope
In recent weeks, federal regulators have unleashed a barrage of attacks on the crypto industry, causing widespread fear, uncertainty, and doubt (FUD) among once hopeful investors. Whether it's a Wells notice, pointed lawsuits, or a flurry of public statements denouncing the industry, federal regulators seem adamant about destroying confidence in the space. However, this week, a glimmer of hope and a potential catalyst for the market has come to light.
Enter BlackRock (BLK), the world's largest asset manager with a whopping $10 trillion of assets under management, which has come out and applied for a spot Bitcoin exchange-traded fund (ETF). Unsurprisingly, other behemoth asset managers such as Invesco and WisdomTree followed BlackRock's lead. Beyond Bitcoin ETF applications, companies like Fidelity, Schwab, and Citadel have teamed up as their new cryptocurrency exchange, EDX, has officially launched in the U.S. Similarly, Deutsche Bank has filed for a digital asset license in Germany, which would allow it to become an official crypto custodian.
Even Federal Reserve Chair Jerome Powell weighed in on the recent news, stating, "We do see payment stablecoins as a form of money, and in all advanced economies, the ultimate source of credibility in money is the central bank." He also went on to say that cryptocurrencies like Bitcoin have "staying power."
The flood of TradFi companies into the crypto industry highlights a significant pivot from prior cycles. Financial institutions like the ones mentioned above have a critical role to play when it comes to bridging the gap between traditional and crypto investments. Ideally, these actions will act as a path of least resistance for large-scale adoption and a subsequent clear and concise regulatory framework.
Author: 8-Bit
3. MakerDAO - Better Economics Than Governments?
At the beginning of the week, MakerDAO’s latest governance proposal went into effect increasing the interest rate charged on all meaningful onchain collateral types. This move was planned to create a sustainable path towards rewarding DAI holders with a 3.49% APY through the DAI Savings Rate (DSR).
Most collateral types now have an interest rate being charged over ~3.75% annually to help drive demand toward holding DAI and to improve the Maker protocol’s profitability. At the moment there are over 160M DAI locked in the DSR out of ~4.6B DAI in existence. Current collateral in MakerDAO is generating annual protocol revenue of $70M.
Another feature to note is how the DAI in the DSR provides the depositor with an ERC-4626 token called sDAI representing the interest bearing DAI so it can be used as collateral in DeFi. Spark Protocol, the first product offering of a MakerDAO SubDAO, has already integrated supplying and borrowing of sDAI.
As The Fed Fund’s rate has increased to 5% over the past 15 months or so, Maker Governance continues to showcase its ability to provide debt cheaper than banks and governments. MakerDAO is at the beginning of its planned roadmap “Endgame” where we will see numerous changes to how Maker operates. A couple of these improvements include NewStable and NewGovToken tokens as well as SubDAOs operating outside of “MakerCore” in a close resemblance to how the central bank/commercial bank model works today.
Interestingly the MKR token is now trading around a P/E (Price-to-Earnings Ratio) of 9.5 which seems to be inline with the banking industry. Larger banks typically trade around a P/E of 8.6 while smaller regional banks with more ability to grow tend to be in the 13.5 territory. Given that MakerDAO is a revolutionary mix of finance, computer science, and gamified economics on a global scale, one could imagine the MKR token deems a price where the P/E is higher than that of smaller regional banks (Buy MKR?). It will be interesting to see how protocol revenue moves as collateral moves in and out of Maker Vaults due to the higher interest rates and increased demand for DAI.
In other news, MakerDAO has scooped up $700M of US Treasuries, increasing the overall exposure to ~1.2B. According to Blockworks, “This decision follows an earlier MakerDAO proposal which asked to increase the debt ceiling for MIP65 from $500 million to $1.25 billion to take advantage of the existing yield environment.
This strategy, designed by Monetails Group, is expected to deliver an annualized yield of 4.5%. DAI currently has a total value locked (TVL) of $8.4 billion, and short-term bond ETFs comprise a large chunk of Maker’s existing collateral (14.8%).”
While stETH and ETH are the largest collateral assets in Maker, US Treasuries are catching up and seem to be taking the place of USDC, essentially skipping Circle as the middle man.
For more key data points on the MakerDAO ecosystem, check out makerburn.com and daistats.com.
Author: UEV Guy
4. Altcoins: Buys & Watchlist
Disclaimer: Our buys & watchlist should not be takin as financial advice nor investment suggestion. We share this information in the nature of education & transparency. We value the ability for our network to be aware of new projects and ecosystems we are actively researching/participating in. Always invest responsibly. And remember…Fundamentals over Pumpamentals!
Recent Buys
Uniswap (UNI) @ $5.98
Dogecoin (DOGE) @ $0.09
Arbitrum (ARB) @ $1.23
Optimism (OP) @ $2.24
Polygon (MATIC) @ $1.13
Ethereum (ETH) @ $1,693