Rook hosts the Tokemak team during a community call. In this AMA, the team discusses Tokemak's origins as a centralized organization and the journey to becoming a decentralized market maker run by the community.
- Tokemak was born out of Fractal, a centralized market maker.
- Fractal worked with decentralized exchanges and DAOs in order to help provide liquidity for digital assets.
- Tokemak aims to "put the power in the hands of the people" by moving market making on-chain.
- A Reactor is essentially a single-asset staking pool, acting as an entry point to the system. Tokens are combined with Pair Reactor assets and deployed into the market as trading pairs.
- Permissionless Reactors will require a certain amount of TOKE to be staked as collateral before ignition.
- There may be another C.o.R.E. before permissionless Reactors are supported.
- Bribes are currently utilized during C.o.R.E., but in the future we may see more real-time bribe influence with liquidity directing.
- The team believes that in web3, liquidity shouldn't be owned by a trading firm, but natively as a layer of the internet.
- ACC is somewhat analogous to Convex, but generalized to a wide variety of assets.
- ACC will allow for the rapid growth of protocol owned assets, and will offer dividends via a revenue share mechanic to lockers.
- A Reactor can allow projects to combine their pool1 and pool2 into a single staking pool in order to drastically simplify the user experience for token holders seeking to earn yield.
- WBTC is being considered as a Pair Reactor asset given its utility as a base pair token.
- Tokemak governance has been possible during C.o.R.E. and through liquidity directing, but the recently announced Snapshot voting system will allow more traditional community governance proposals.
- Tokemak has been happy with the system's stability during the volatile market conditions, and does not share the same problematic impermanent loss mechanics as Bancor. In the event of a "bank run," Tokemak has the required assets to cover depositors.
- The Tokemak team will be present at EthCC in Paris!
[00:00:00.190] - whatsthedeetz
Well, we're just after the top of the hour, so we'll go on ahead and get started. Thanks everybody for joining. I'm whatsthedeetz or Kyle here with another Rook community call. Today we've got an extra special one and one I've been looking forward to for a while. With us is a handful of folks from the Tokemak team. We've got CJ, Bruno, and Craig up here with us. Guys, how are you doing?
[00:00:26.690] - Bruno
Doing great, thank you.
[00:00:27.860] - Craig
Doing great Kyle. Thanks. We've been looking forward to this as well.
[00:00:32.210] - whatsthedeetz
It's something that I know we had our call last week about – spinning up the reactor – and we'll get to that in due time today, but I really wanted to just kind of start this off, making sure that you guys got a chance to introduce yourselves and then we'll dive into Tokemak. So why don't we start? CJ, why don't you let us know what you're doing at Tokemak, and then we'll just kind of go down the line.
[00:00:58.520] - CJ
Yeah, gladly. So I joined up last September primarily to assist with partnerships and DAO to DAO facing activities. I stay pretty busy over here. We're fortunately in high demand from DAOs wanting to use our liquidity services and such.
[00:01:15.370] - whatsthedeetz
[00:01:17.950] - Bruno
So, yeah, my name is Bruno. I have this little bit clumsy screen handle that I... lately change it. So like many on the core team, I wear like many hats, as usual in crypto. But I would say that I'm mostly focused on strategy and tokenomics along with other people on the team. Yeah, that's pretty much it.
[00:01:43.530] - Craig
Great. So I'm Craig... I was on the founding team of Tokemak that was spun out of a centralized market maker. Centralized meaning a centralized company. We were focused on DeFi and today, along with everybody else on this call, wearing a lot of hats... kind of broadly bucket, a lot of my focus on product and growth.
[00:02:13.050] - whatsthedeetz
Awesome. Well, I think that that's an interesting place for us to kick off right there then. So you said that Tokemak was spun out of a centralized market maker. Tell us a little bit about when and how you guys got started and how that's led to today.
[00:02:30.390] - Craig
Yeah, absolutely. So, let's see, I had met Carson – everybody here I think probably knows, but he's the Tokemak founder – and was the founder of this centralized market making company called Fractal.
Almost day one when crypto became my day job. I was working for a liquidity aggregator at the time called Total, very similar to 1Inch, and he was starting Fractal and we kept in touch over a while – a couple of years – and I ended up joining Fractal at a time where they were going through an interesting growth phase.
So Fractal at the time was trading digital assets on chain and off chain, kind of as a proprietary trading shop, but where we had really started to get traction was working well in conversations with both decentralized exchanges and with protocols themselves who had TOKE, who are really struggling with creating liquidity for those assets... and DeFi looked very differently at this time.
And so what we ended up doing – and scaling pretty well – was trying to work with these groups and help them establish a baseline of liquidity in the market, on which more organic liquidity and depth could continue to build. And one of the things that we tried to do in this process was align incentives much better than they typically or historically have been between market makers, really, and anybody who they're working with.
[00:04:20.110] - Craig
Working with market making firms is usually expensive. It's a black box. It takes quite a bit of negotiation and formal arrangements to spin these things up. And in the end, the market makers really have all the control. And as Fractal we wanted to change that model and align incentives and provide much greater transparency along the way to support people who need liquidity. And by helping them, we were part of the tide that was rising to lift all boats.
And kind of over the course of that process we had the idea that we're still constrained by being a centralized entity in this process, trying to help decentralized protocols. Is there a way in which we can provide the same kind of service or even a better service and decentralize ourselves? And that was really the kind of inspiration for Tokemak... is to move everything on chain and align incentives in a way where everybody can participate, remove the friction, remove the cost, remove the overhead and complexity of creating liquidity and put the power in the hands of the people who it helps.
[00:05:40.810] - whatsthedeetz
That's awesome. So you talk about decentralization. Tell me about some more of those kind of key elements that you guys have built into Tokemak that allow that decentralized element to really take shape.
[00:05:58.810] - Craig
Yeah, that's a good question. So I think that the easiest mental model here for Tokemak being a decentralized market maker is to look at what the core components of a centralized market maker consists of.
And this is definitely an oversimplification, but the roles within a market maker are: one, they are a capital provider. They have capital. Two, they make strategic decisions about where to create liquidity and where they think deploying liquidity and trading can be effective. And three, they need to know how to price these markets.
So we have a role within Tokemak that effectively replicates each one of those functions. The simplest is the liquidity provider. They're the capital provider in the system. And I think one of the beauties of Tokemak – one of the pieces that are elegant that I'm always really excited about – is that we enable any participant to just act as one or all or many of these different kinds of roles in the system. First, as I said, is the liquidity provider. Very simple single-asset stake. Those assets are used to create liquidity throughout DeFi, and for providing those assets, they earn a return. We call that being an LP in a Reactor, which is our initial pools in which folks deposit their assets.
[00:07:38.270] - Craig
The kind of strategic decision making on where liquidity is created is handled by the liquidity directors in our system, and those are our community of TOKE holders. So TOKE is our native token. And by depositing TOKE into Tokemak, liquidity directors are able to control to where liquidity is deployed, and that includes assets and asset pairings and exchanges. There'll be a lot more knobs and levers and assets that ultimately we're expanding into that we're really excited about, and we can kind of get into that later too.
The final piece of this is the pricer. There'll be phase two of Tokemak, and I think we've got a lot of ways that are really exciting and helpful for protocols and DEXes that we can use to create liquidity within our current system with the LPs and the LDs that are live today.
[00:08:46.310] - whatsthedeetz
That's awesome. So you touched on something: the main way that your folks that are going to be helping with you interact, and that's through the Reactor. Tell me about how the Reactor was invented and what it does.
[00:09:03.470] - Craig
Yeah, another good question. So our Reactor – which the sort of branding and imagery around was created by Internet Paul, one of our amazingly talented members of the team – at its core function, is actually pretty simple. It's a single asset staking pool.
[00:09:26.880] - Craig
But it's sort of the entry point into the system for capital that is a really important piece of the system. So as LPs deposit capital, as I mentioned, they earn rewards for providing that capital in the system. It's a very simple process. And by doing this, they enable us to productively deploy those assets and support the protocol in the Reactor that they deposit into. So we have a Reactor for all the protocols that we support.
In addition, we have a Reactor for what we call pair assets, which are quote assets in traditional finance. Think of those like ETH or stables as kind of your mental model. We'll take the assets that have been deposited into a protocol's Reactor, pair those with something like ETH, and then those get deployed into the markets to support the protocols that have their live Reactor.
I think we kind of skipped over this part, but congratulations on your recent win in the C.o.R.E. event! Many on the team have been Rook supporters for a long time, and it was awesome to see consistency with our wider community of TOKE holders voting to get you guys in.
[00:10:49.860] - whatsthedeetz
Well, you must be reading my agenda, because I was just about to get to C.o.R.E. and ask about it. My understanding is that you guys started with your... what you call that kind of... quote pairs as well, and then opened it up to governance and started these C.o.R.E.s, of which you had three. Can you just tell us a little bit, just briefly, about kind of how that C.o.R.E. idea got started... and how that evolved to where it's at today, and where it's headed?
[00:11:26.090] - Craig
Yeah, absolutely. The C.o.R.E. events are something that has really evolved into something that we on the team look forward to, and I know many in the community look forward to... just a lot of fun. And the origination of this idea was: as we were moving forward into our launch roadmap for Tokemak, there is a natural stage where we had to select the assets that we wanted to launch with. And of course, that's a subset of assets that we wanted to keep relatively constrained as we kind of built out the system and ensure everything works the way we want it to. And as we were having discussions about which assets would be the right fit for us to go to market with, the question arose: why are we the ones that are making this decision? This does seem to be the perfect kind of opportunity, even if we're very early to open up to our community. So what the C.o.R.E. event is – and it's an acronym for Collateralization of Reactors Event – is a week long event in which the community of TOKE holders votes to any Reactor that they would like us to launch with. And it's been really fun to see who the community selects.
[00:13:00.730] - Craig
We have always have had a broad range of types of protocols that they were able to vote to. And the voting over the course of the week had what we call our leaderboard kind of shift around who was in, who was out... and right up into the last minute, there's a bunch of activity and people shifting around. At the very end, we have five Reactors in which are, quote, the winners – very simple, who received the most votes – and then we move forward with the governance process with each of those communities to stand up the Reactor.
[00:13:40.890] - whatsthedeetz
Awesome. Hey, it looks like we have Carson joining us as well. Hey, Carson, how are you doing?
[00:13:45.590] - Carson
Yes, doing well, everyone. Sorry I'm late. I was telling the team Murphy's Law hit today. We've got a leaking problem at our place and currently have been out with those groups, and I think they may call me in about 15, but I will join for as much as I can here. Sorry for being in and out.
[00:14:00.400] - whatsthedeetz
Yeah, absolutely. No worries. We're happy to have you. So that's fantastic. Something that I was reading about in one of your latest updates is: planned in the future for C.o.R.E. was an element of permissionlessness. Am I correct in that? And tell me a little bit more about that if so.
[00:14:20.590] - Carson
Happy to hit the ones that I can here before I get pulled back out for this house stuff. So, on the permissionless side – Craig just gave a good overview, I think – of course, which was always going to be sort of the first way that we got Reactor spin up or really liquidity spin up started going forward. Our plan is to move to what we for a while have been calling permissionless spin-up. We're probably going to call it something slightly different, maybe decentralized spin-up. Because what is going to enable is non-event-based liquidity or Reactor spin-up. So groups could now think a little bit analogous to like establishing a liquidity pool on SushiSwap or Uniswap where people can drop a token hash in, or the two token hashes, and establish a pool in a decentralized fashion. It will be somewhat analogous to that, with the exception that you still will need a certain amount of TOKE staked to the pool in order to turn it on. And that's basically how we can ensure that the liquidity is not some project just looking to rug or that's sort of a bad actor.
[00:15:28.770] - Carson
And there are various ways that are probably beyond the scope of the time we have here. But that's sort of why we're starting to call it decentralized. So our goal is to get there quite quickly. We may still do a C.o.R.E. 4 event because I think the C.o.R.E.s are sort of generally enjoyed by the community... and we have a little bit more buildup before we're ready to turn on the decentralized or permissionless reactor spin-up. But that's where we want to get fairly quickly.
[00:15:52.590] - whatsthedeetz
Awesome. So something that plays a little bit into both C.o.R.E.s and how your Reactors operate is liquidity incentives. And so something that I've seen with your C.o.R.E.s and across different protocols is a pseudo-kind of bribe market where I believe you guys use Hidden Hand, or you have some elements like Votium for Convex or things like that. Where do you see that portion of the market headed?
[00:16:29.070] - Carson
Very good question. I think this is probably not just for Tokemak, but for broader DeFi. I think the power of governance... or the inherent value of governance, which... many have branded them as bribes, which – while I laugh and enjoy that name – may in some ways be an unfortunate naming. But it's really just the inherent value that your governance has.
I would say there's three different general ways that this has been used out in the community, and two or three ways that this is being implemented within Tokemak. So I think many of you probably have sort of seen how the bribing mechanism works – a la Convex. We had something called Votemak, which was sort of the equivalent of Votium for Tokemak, and this was predominantly used for our C.o.R.E. event, or thus far was used for our C.o.R.E. events. So it was groups using that governance power in order to sort of bribe those that have governance in order to attract attention and votes... to a project and therefore establish a Reactor. Governance within Tokemak is a much more sort of fluid real time endeavor as well. For any of you that aren't familiar with this: in Tokemak in real time or in cycle basis – week to week – you can use your TOKE to direct liquidity.
[00:17:46.430] - Carson
So once the Rook reactor is established, you can come in and say: hey, I want to see if you have 10% of the TOKE that staked to the Rook reactor. You would get to direct 10% of the Rook and ETH liquidity, paired into Rook-ETH liquidity, across DeFi. So you could direct it to SushiSwap, Curve, et cetera. And the bribing markets... will go to that more real time governance, where right now they're very much sort of event or discrete vote-based.
So that's something I know with the Hidden Hand Team we've been discussing, is... how could they start enabling this for sort of a real time continuous market for bribes or to incentivize votes within Tokemak? And that's, I think, where this will be going. So you're starting to see, like, various stacks of payment for governance that are being built up on top of Tokemak and other protocols. And my sort of take on it is: it's something that, in a decentralized or permissionless market, you can't prevent. So you might as well enable it to flourish, and then just make sure you sort of do what you can around it to make sure that the incentives aren't misaligned with what you're trying to do within the protocol.
[00:18:57.780] - Carson
So in the case of Tokemak, it meant us having a very open line of communication with the Hidden Hand Team, understand what they're implementing and how, and then making sure that our internal incentives sort of stack with what they're trying to do, and that they're not doing something at odds with what we're trying to accomplish. And we've been very successful thus far in making sure that's the case.
[00:19:19.290] - whatsthedeetz
That's awesome. All right, so I've got a little bit of a loaded big picture question for you, and I'm stealing a little bit from one of our community members' questions, but what are you guys doing to, say, position yourselves in the market that separates you from others? Or, kind of on the flip side of that, what are some big roadblocks that you need to overcome to really achieve the success that you're aiming for?
[00:19:47.910] - Carson
Yeah, great question. So I think one of the sort of positioning and how we think about liquidity and market making that I think differentiates us – and then I'll get more tactical here – is we think of liquidity and market making here as a layer of the internet, not as something to be run by a prop trading firm or market making firm. So we think of Tokemak very much as like the liquidity bandwidth of DeFi, and really of web3. Our goal is to, over time, enable enough friction reduction in providing and directing and utilizing liquidity that we can basically unlock valueless transfers.
What I mean by that is: slippage should become a thing of the past over time, once there's enough liquidity bandwidth in a web3 token-based economy for all these things to flow freely and trade one into the other. So that, I think, is just a shift in mindset... where we're playing to, versus most groups that think about liquidity either are building some sort of a novel liquidity approach on top of an exchange. We don't want to be an exchange. We don't want to be limited to one exchange.
[00:21:00.680] - Carson
So we're taking a much more holistic approach. And other groups are doing it – trying to own the prop trading stack. So over time we're actually going to incorporate a lot of trading and market making firms as what we call pricers in the system, which is the last component that we're going to be adding in the future.
I won't go into a ton of detail on that here, but it's really... we're just thinking about: how do we disaggregate these things and be a protocol that is agnostic to all of these different moving parts, as opposed to just kind of trying to monopolize or own this thing as a trading firm? I think in terms of... getting a little more tactical, right, that's very like... maybe abstract, visionary kind of stuff. Getting more tactical: I think DeFi, and Tokemak included, is going through obviously a lot of growing pains right now. But really those are market-focused. But I think product-market fit is undergoing somewhat of a sea change at the moment as well. So in the past it was very much... you can think of it like: this financial infrastructure in the past was built out of necessity of real life companies and businesses that now needed to access lending markets, credit markets, and all these different things.
[00:22:12.520] - Carson
So it always came from a business need first. Here it's happening in reverse. So DeFi started building itself, and it needed to be there in order to then enable more web3 business models. So effectively it's being built in reverse. What that means is: the very first era of DeFi – that I think we just sort of saw the book closed on – was DeFi protocols built and then immediately looking for users. And that's where retail stepped in, and that's why DeFi has been predominantly retail-driven. It was financial and technologically minded people that stepped in to do the role of other protocols, because the other protocols didn't exist yet.
The next phase of this is going to get broader adoption of things like Tokemak, things like Keeper, things like all of these different really interesting primitives that are out there... is going to be more protocols in the adjacency around DeFi. But then, importantly, a retail movement that's predominantly web3 and product-based – as opposed to financially and technologically minded people, which has been the small slice of retail that's been focused in DeFi thus far. And I think large institutions with a lot of capital – we need to get them to flow capital into DeFi in a bigger way.
[00:23:19.500] - Carson
There's obviously that institutional adoption of Bitcoin. We need more sort of adoption of DeFi, even though I think DeFi can disintermediate those things so that in the future you don't need those. I think we have one generation worth where we actually need to have that capital sort of blowing into DeFi, so we can eventually disintermediate those participants.
I'll pause there and see if anyone on the team has more. I'm always thinking out like quite a ways out. So all of that might have sounded out there compared to the actual question that you teed up. Anyone on our team have more like close to today thoughts on the question?
[00:23:53.750] - Craig
I think all that sounds great and totally aligned that there are some things that I think that are near term. I think one of the things that does continue to differentiate Tokemak is this: Carson used the term real time, which I think is really powerful for all of the participants in our system. We are able to direct liquidity to where it is the most useful, the most effective... to where it can achieve whatever the goals are of our TOKE holders. And I think that's really powerful.
We are a meta-layer that sits on top of DEXs or wherever liquidity can flow into. And that gives us a tremendous amount of... that gives the participants in our system a tremendous amount of flexibility and influence over liquidity itself. That enables us to use a lot of the new innovations.
I'm not sure if there were some specific kind of competitive things that you might have had in mind, but really I see almost everything being built in this space is symbiotic with our ultimate mission to aggregate assets and deploy them to where they can be helpful.
[00:25:08.750] - whatsthedeetz
Awesome. Something that it makes me think about is around liquidity. There's been some interesting new... what I would call innovations around it. Your Reactor is definitely what I would consider one of the most unique and interesting things that I've seen. You have folks incentivizing... if you look at the Olympus model for Olympus Pro and growing protocol owned liquidity... kind of thinking about that kind of stuff, and what I read from one of your latest Medium articles about your ACC Tokens. Can you tell me about those assets and... where that might change things?
[00:26:00.470] - Carson
Yeah, I'll start sort of high-level again and then drill down into this. So I think something again with sort of the moment that we have in the maturation of DeFi is that things are flowing over from everyone being hyper TVL-focused, which... TVL or Total Value Locked is sort of... how much debt can you finance, if you think about it. So it was an important first step where groups were very much focused on how much basically liquidity can just be sitting in a contract.
But moving forward, I think groups care a lot more about what's commonly called PCV internally. We sometimes call PCA or POA for protocol owned assets because these are things that the protocol owns free and clear and can't evaporate. I think many of us have seen liquidity in the form of TVL move away as people go sort of risk-off in the current market, or any time incentives change. So what we're really trying to accomplish with this ACC TOKE model is rapid growth of our protocol owned assets. So a group that's done this very successfully is Convex. So if you look at what Convex did, they basically built a better mousetrap by pulling apart governance power from revenue-generating power within the Curve ecosystem.
[00:27:19.860] - Carson
And Bruno can keep me honest here, but I forget... I think it's like 40% or more of the CRV is owned by Convex. I'm sure I have that number wrong, but it's some crazy amount. And they've basically done that just by having a better mousetrap. And minting... you could say sort of a worthless new token, every time CRV comes in. So they've been... cvxCRV and handed out.
It's not perfectly analogous to what we're doing with ACC, but the sort of concept is there in that if you can offer a better mousetrap where there is liquidity as a utility, plus some interesting revenue leverage mechanics that only a group doing this at scale like Tokemak can offer, you can start growing the protocol owned assets very rapidly.
So the best way to maybe summarize, because... if you look at our ACC TOKE article, you really have to sort of sift through; it's very mathematical. The summary for those that aren't mathematically minded is: it's going to enable locking of TOKE, which will be helpful in reducing supply or taking float off the market. Second, it's going to enable an interesting almost dividend-like mechanic, which we think will be quite important.
[00:28:33.130] - Carson
And then third: over time, we're going to actually be able to take a piece of our profitable revenue and distribute that in the form of more ACC TOKE, which is essentially locked tokens. So we believe this will be an important step, as protocols move beyond the inflationary phase that was the last phase of DeFi, and start to think about how they can generate value in a sustainable or eventually sustainable fashion, rather than sort of the way most of DeFi has been growing over the last two years.
[00:29:01.730] - whatsthedeetz
Awesome. So let me circle back to, you know, your current stable of Reactors, and especially the Token Reactors that you have from your C.o.R.E. participants. Do you have examples of optimized strategies you've seen folks either deploy or modify to improve as? Obviously our protocol is in that same boat; lessons learned can be so valuable. So I'd love to hear any insight you guys have about folks that either have learned and improved, or have deployed a strategy that you would have happily championed.
[00:29:50.030] - Carson
Yeah, I think... and just make sure I sort of get the gist of the question: is it most thinking strategies while using Tokemak by projects, or more general liquidity strategies across the space on how to deal with inflation and liquidity, or both?
[00:30:07.820] - whatsthedeetz
Well, if you want to just come work for us and tell us exactly everything we need to do across every protocol...
[00:30:16.130] - whatsthedeetz
Just tell me about how folks can use the Reactor to get the maximum impact.
[00:30:22.010] - Carson
Sure. So I think in general having a group of liquidity directors, which... again, we're throwing out a lot of jargon on you for this call. So feel free to... anyone that's interested in this, pop over to the Tokemak Medium if you want to read more of this. A lot of the early articles will get you up to speed.
Liquidity directors are just stakers of our native token TOKE that can then direct the liquidity. So if it's a Reactor, ABC or in this case Rook, you want to have engaged participants that act as liquidity directors to give us the signal on where the liquidity should be deployed.
Our thesis is that the protocol and the protocol's community are the ones – meaning in this case Rook, not Tokemak – are the ones that know best way to deploy the liquidity. So you know whether there's other protocols that are leaning on SushiSwap for some reason and how they're operating, or whether there's something in CurveV2 that you want to capture, or where the users of liquidity – which are not only traders and investors, but other protocols and other web3 participants – need access to liquidity.
[00:31:25.400] - Carson
So our biggest sort of takeaway was just disaggregate that director into a consortium of directors which are the protocol in their community, and then really just set up the incentives around that in the right way, so that liquidity providers and liquidity directors are incentivized.
That sort of would be my main takeaway: make sure that... anyone in the community that's on this call, and then importantly within the protocol as you amass TOKE which you'll earn as you provide liquidity, use that TOKE then to route wherever you think that that liquidity is most helpful to you.
And there isn't really one size fits all, I would say to this. We see some groups that want 100% of their liquidity on SushiSwap, and that's fine. And there's other groups that want their liquidity split between two venues. I wouldn't say there's a right answer. I would say you don't want to spread it so thin that you have large slippage or large volatility and limited liquidity on four venues. Something like that.
Craig, you probably have some thoughts. Craig, or anyone on our side, thoughts on what strategies you've seen successful? Here's one other that I'll throw out, and then I'll let them go.
[00:32:33.520] - Carson
And I think I'm getting called back here, so I may have to drop in a minute. But one other interesting strategy is merging pool1 and pool2. So instead of just having ABC staking pool and an ABC/ETH Sushi or Uni LP staking pool through Tokemak, you can actually merge those into one. So when you stick into Tokemak, you get back a tAsset. So in this case, tABC. And because those underlying assets are deployed by Tokemak across the ecosystem, you get liquidity in a pool1 style. So a number of groups have either replaced or explored replacing their two pools with a single pool that they can pay one bucket of inflation to, or emissions, instead of two... and still get all the benefits of a pool2 while making the experience very simple for their users, where they just have to stake the single token and not bring the ETH to the table. Craig or anyone on our side: any other sort of learnings or best practices we've seen from strategies from projects?
[00:33:33.110] - Craig
I think that was a pretty good summary. As Carson mentioned, we do see folks have a preference for one venue versus another venue. And so to the extent that you have relationships or some philosophical alignment, aggregating in one spot definitely can make sense. Splitting can make sense, depending on if you just want some sort of presence in multiple places. Again, without being spread too thin.
I think that the strategies right now are pretty straightforward. Where it will start to get more interesting is as soon as we turn on more venues that offer different tradeoffs in how that liquidity is deployed. That's just a little bit of a sneak preview. I can't tell you too much about it. But in addition to different assets that can be paired against a token, there will also be different new venues with new kind of levers that are being turned to establish liquidity that is almost unique to whatever the current liquidity profile of a project looks like... where we can kind of support them through the growth and maturation of their liquidity throughout the space, which I'm really excited about and I think will be really helpful for the space.
[00:35:05.090] - whatsthedeetz
Awesome. All right, let me see here. Why don't I go on ahead and pause... and I've got a few more questions but, you know, we've got some folks in the audience here. Does anyone want to hop up on stage and ask a question for these guys while we've got them? I can always continue... Starfire. I'm going to call you up here.
[00:35:27.290] - Starfire
Thanks, deetz. Can you guys hear me all right?
[00:35:29.410] - whatsthedeetz
Yes, we can.
[00:35:30.570] - Bruno
[00:35:30.930] - Starfire
Perfect. This is sort of just kind of like a general question regarding liquidity, but if you guys were trying to determine a certain amount of liquidity that you want on an asset.... is there sort of like a sweet spot in terms of the amount of utility you can get out of the amount of liquidity? Or is it kind of just based on like the assets, like how mature the asset is and where it is in its market cycle? Is there any kind of optimal level that you guys would recommend?
[00:36:06.230] - Carson
Yeah, very good question. The weirdest thing maybe about liquidity and market making is as much as it's very much scientific, it's also like an art. But I will say there's general guidelines to this and that it depends. How big tranches of buys and sells is probably one of the biggest. How big and how frequently natural holders of the token need to interact with it. So depending on the protocol, right, it might be a liquidator that needs to acquire or sell the token, or whatever you want to see. Is it usually $100 clips other than just speculators that need to go through this? Or is it like people need to buy $50,000 at a time because that will determine if it's usually larger clips? Then you need more liquidity, deeper liquidity, to be able to absorb the moves without causing a crazy amount of undue volatility or prices, especially to the downside for the token if it's smaller clips. And early on in the project, there can sometimes be an argument for less liquidity, because – especially in the last cycle when things were in a bull market and you launch a token and it generally goes up – if you have less liquidity, it means that the possibility of it mooning is higher.
[00:37:18.590] - Carson
If you know that you have a natural floor for some reason to the token – which can happen for various reasons – and then later once it gets more mature, then you'd want to establish more liquidity. This is strictly from a sort of gaming or optimizing like price mechanics to the token. But again, I would say the biggest thing is the natural holders or users of the token, which can be other protocols, making sure that protocols – and users really in the space, more than traders and investors – making sure they have liquidity to support the size that they interact with the token.
[00:37:51.050] - Craig
That makes sense. And I've always kind of viewed liquidity as a double-edged sword. Like if you have too much liquidity, it obviously takes more to move it up. But if you have too less... or if you don't have a lot of liquidity on the way down, it's just an elevator.
[00:38:05.060] - Carson
Yes, definitely. Right.
[00:38:07.790] - Starfire
[00:38:09.230] - whatsthedeetz
Thanks. I've got Breeze hopping up here.
[00:38:12.060] - whatsthedeetz
Breeze, you want to go ahead and unmute and ask your question?
Breeze: Yeah, for sure. Hey guys, I just have a quick question in regards to token Reactors. How difficult would it be to implement like a WBTC or renBTC pool, and would you have to be voted on by liquidity directors and go through the C.o.R.E. process?
[00:38:34.010] - Carson
Yeah, that's a very good question. The short answer is it's definitely one that we've been discussing internally. And generally anything that is a governance token or project token, we've been saying that has to either go through... up to this point C.o.R.E., or eventually this decentralized Reactor spin up. WBTC or BTC, you can make the case that this is... or I shouldn't even say make the case. It can be used as a basically, quote, currency. So something you pair up with the base tokens, ROOK and ALCX and all those kind of things. And so we've talked internally... that's one where we can probably push through with much more limited governance – just put it up to a community vote, I think, to turn one of those on. And it is something... like if that's something that would be interesting to you, we've been fielding requests for that, and I think that could be an interesting thing for us to add. I think more liquidity paired against WBTC or renBTC or whatever in the space could be really interesting, for sure.
[00:39:30.800] - whatsthedeetz
Thank you. Thanks, Breeze. Looks like we have a question here in the voice chat asking about TokeDAO. So maybe if you want to just quickly talk about governance and then... if that is something that you could also expand on.
[00:39:49.730] - Carson
Yeah, so we actually have our first governance vote – we called it "operational governance" – live since day one, which was: where should the liquidity go? We don't want to determine where it is. We want the community to determine where it is. We just recently added Snapshots. So we have our first Snapshot vote on right now, which is to establish the Tokemak Foundation. So you're going to see a lot more in sort of traditional governance at the DAO level, starting... really yesterday, I guess, in Tokemak. And you'll be seeing a lot more of that as we continue to push towards more and more decentralization.
So I would say there's three levels of governance to Tokemak. One is the liquidity direction, so determining where operational liquidity should be deposited and really flowed across the ecosystem. Second are the C.o.R.E. events to determine which project should be on Tokemak in the first place, and that will be replaced with decentralized Reactor spin up, but still where it will use TOKE governance to do so. And then the third thing is the Snapshot code for more... what's called strategic or initiative governance. Those are kind of the three levels that we're using.
[00:40:56.430] - Carson
It looks like I just got pulled where I have to jump back out. I will try to join the call if one is still on, but you're in good hands with the rest of the team here. And thank you for having me on. Sorry that I've been on and off on this call.
[00:41:06.730] - whatsthedeetz
No worries, Craig. Sorry, Carson. We're happy to have you here. I appreciate it.
[00:41:11.720] - Carson
Yeah, of course. Good to chat with you. And we're always happy to schedule other ones and go deeper on anything. Good to be talking to you guys.
[00:41:19.060] - whatsthedeetz
Of course. So something I did want to follow up on there was: did he mention that you guys have a foundation? Is that what I heard correctly? Can you maybe talk a little bit about what went into the decision to create that?
[00:41:37.010] - Craig
Yeah, I can start on that and anybody else on our team can jump on. It's definitely led by counsel, so lots of caveats about me not being an appropriate person to take legal advice from, or even probably the expert to walk us through this. Apply here.
As we've seen, after quite a bit of discussion and analysis of how other DAOs have approached their broader community structure, it became relatively clear that there are pieces of a protocol which will operate better if there is some kind of recognized entity able to kind of represent. And those in particular are things around IP and management of the treasury. And this is very analogous to the approach Maker took in setting up the Maker Foundation that supports the protocol. As you know, with Maker, the foundation was ultimately wound down after a period of time in which the protocol was... truly take over and fulfill all of the requirements that a protocol would need to do to manage these pieces. And I think that's the ultimate goal too with the Tokemak Foundation... is that, at the appropriate time, that will be able to be dissolved and kind of handed back over in a nice transition to the community.
[00:43:37.030] - whatsthedeetz
That's awesome. All right. Well, let me pause again. Are there any other community questions that folks have for this crew? Hey, Troy.
[00:43:50.000] - Troy
[00:43:51.100] - Troy
Hey, Craig. Hey, everyone. My question was surrounding the single side. I've seen a lot of comparisons between Tokemak and Bancor, who is one of our first partners earlier. Recently, they had to kind of turn off their IL due to some market conditions. Has that impacted any designs that you guys have for your platform? Or are there any, I guess, similar concerns that we should be on the lookout here?
[00:44:35.250] - Craig
Yeah, that's a great question. So I think one level setting piece here is: I'm familiar to high level with Bancor and their IL protection, but I'm definitely not the expert to comment on their system. From what I understand, the mechanisms which their IL protection used in their design are quite different from Tokemak mechanisms. And I think as we look at this very, very disruptive time in the markets, we've been pretty happy with how well the system has remained stable in the way that was expected, based on our designs and the intended behaviors.
One of the things that's really important about Tokemak is that... the way our backstops are set up... we have a few different layers. We are not leaving capital on the markets. If there was kind of a bank run at this moment, we would be able to repay effectively the depositors who act as LPs in our Reactors, and that's one of the core tenets of our design. We have additional fallback mechanisms that are in place in case we need to draw on them, but we have designed the system – and today we've scaled it – in such a way that we're very conservative with how we deploy assets that are effectively lent to us by our users.
[00:46:40.050] - whatsthedeetz
Awesome. Great answer. Thank you. Time is flying along. I love chatting with you guys. Unfortunate that Carson left. I was going to praise him for his talk that I got to sit in on at Permissionless. And I know, sadly, that I underdelivered on bringing a bottle of wine for CJ. I'm going to blame that on the airport. But what do you guys have planned... for kind of getting in front of new audiences and stuff? Any other conferences you'll be attending, or other opportunities?
[00:47:20.590] - Craig
Yeah, of course. We are out in the communities as much as we can be. We learn and love to engage for our own personal benefits – I think if I can somewhat speak for the team here – as much as trying to get it out there for the purposes of Tokemak.
I believe that I can confirm all three of us on stage right now will be in Paris for EthCC in about a month, and if anybody is out there would love to say hello, definitely let us know. And then I think beyond that, we're probably still figuring things out, but certainly intend to be where we can be.
[00:48:04.390] - whatsthedeetz
Well, cool. I'm going to throw one last softball at you guys before we wrap this up. What bit of information do you want to impart onto our community here that maybe we didn't cover today... or just remind us about some exciting stuff down the line for you guys?
[00:48:24.970] - Craig
Yeah, that's a good one. I think a reminder to us all in this space given where all of the sort of turmoil that we've seen – not only in crypto, but more broadly – is that this is build season. This is where real builders get to have fun, and we have a ton on our plate that I think kind of completes a lot of the pieces of the system as we continue to expand our vision of all the things that can be. So I hope everybody is paying attention, keeping good spirits as personal portfolios might be moving around, and realizing that this is all a build for the long term. And we're in a great position at Tokemak to be a part of infrastructure that is put in place that enables this whole space to continue to grow over time.
[00:49:25.210] - whatsthedeetz
Awesome. Bruno, CJ, any last thoughts from you guys?
[00:49:30.850] - Bruno
No, I was actually going to...
[00:49:33.950] - Bruno
Craig stole my speech...
[00:49:37.880] - Bruno
Yeah, I was just going to say... it's actually interesting that... what Craig said, because – and I think you will certainly agree to that – is that while this... market is like upsetting ultimately to everyone of like teams and protocols, but it's important to understand for the broader community that... oftentimes on the other side, in the builder community, the mood is not as terrible, right? It's truly like: now it's building season. Nothing is really slowing down. If anything, actually communications between teams increase. And I think we'll have to weather the storm, and I think great things to come. It's not the first time this happens. Also, certainly like the macro environment, this time is a little different.
[00:50:38.630] - whatsthedeetz
Awesome. Well, we can go on ahead and just call it a wrap there. To the three of you: I can't thank you enough for coming on over to our little shop over here and sharing your thoughts with us. We're excited to really be kicking this partnership off. I know that you guys had mentioned igniting Reactors is on the way, and as we develop our strategy and are in contact with you guys, you guys have been absolutely fantastic to work with. And so for me, I hope that we get to maybe bring you back on again in a few months and talk about the success of what we've done together. But again, just a big thank you all for joining us today.
[00:51:26.330] - Bruno
Awesome. Thank you for inviting us over. It's always a pleasure.
[00:51:30.050] - Craig
It's been a pleasure, Kyle. I'm excited we got to do this, and I'm excited for everything that's yet to come.
[00:51:37.850] - whatsthedeetz
Awesome. Well, CJ, Bruno, Craig and I guess if he comes back for the recording message: thank you guys so much.
We'll just wrap up with a little bit of housekeeping today for folks that had been watching our snapshot. I believe that our latest KIP passed unanimously. Check out our announcements channel if you haven't seen that. We have been having some interesting conversations in Treasury Tuesday and in the governance workshops as well. Those recordings are up on YouTube as will be the recording for this later today. And then just one last item, which is Town Hall tomorrow, 03:00 PM. But outside of that, just another huge shout out to the Tokemak team for everybody that showed up today and had some questions. Thank you and we'll go on ahead and adjourn today. Thanks everybody. If we don't see you tomorrow, have a great weekend and thanks again.
[00:52:43.370] - Carson
[00:52:44.990] - Craig
[00:52:46.490] - whatsthedeetz
Of course. See everybody. Bye.