Announcing Granada

Research and Development
184

I’d like to weigh into this discussion.

First, while I am certainly in favor of liquidity baking and voiced my support for the proposal months ago, simply voicing support for a draft should not imply that I support every aspect of the final proposal based on the draft. It implies general support for the concept or idea, not complete, unequivocal support for every unknown implementation detail.

One principle that is paramount for decentralized, autonomous protocols like Tezos to consider is to reduce reliance on any centralized infrastructure that might be vulnerable to coercion by regulatory bodies, governments, or any other party. The inclusion of tzBTC as an asset in the single liquidity pool incentivized by liquidity baking violates this principle.

In order for tzBTC to remain viable, Bitcoin must be custodied, tokens must be minted, and resources, both financial and otherwise, must be spent by parties that may or may not share common interests with Tez holders. If tzBTC were to disappear overnight for any number of reasons, such as the custodian shutting down, or regulatory pressure, this could have dramatic, unintended consequences for liquidity providers in this protocol sanctioned liquidity pool.

It would have been nice to see liquidity baking arrive without an officially sanctioned liquidity pool, but instead a mechanism by which bakers can vote to allocate inflation to multiple liquidity pools that could be deployed by anyone from an open source contract. This could be similar to the way Curve allows CRV holders to vote on gauge weights - a gauge weight translates into how much of the daily CRV inflation it receives: https://resources.curve.fi/faq/gauge-weights

In general, I would like to support liquidity pools with tokens in them that are not controlled by central parties, as these central parties introduce additional risks. For example, I would like to see tBTC instead of wBTC or tzBTC (assuming we had tBTC available on Tezos).

We can see a good example of the systemic risk potential by Maker’s choice to enable DAI to be collateralized by USDC. At this point in time, approximately 40% of all DAI is collateralized by USDC. While USDC is a very sound protocol with proof of reserves and regular, monthly audits of the reserves, this also makes DAI vulnerable to a single bad court ruling or government order, which could have the chilling effect of making their USDC balance 0 and the entire protocol insolvent.

Because it is a slippery slope from the small amount of tzBTC liquidity we have today to the $billions of liquidity in DAI, I think we should be careful to officially sanction centralized tokens at a protocol level.

Lastly, I would just like to comment that I find the level of discourse troubling. I know @keefertaylor personally and he has selflessly spent thousands of hours working in the Tezos ecosystem for several years, much of that time uncompensated, simply because he believes in the potential, and I know Keefer has the utmost integrity and would never intentionally lie or mislead others. To accuse others of lying simply because they disagree with your opinion and to personally attack them is unacceptable, and should be strongly discouraged by everyone here.

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185

Thanks for sharing Luke.
I tend to agree with almost everything you said, especially about tzbtc being a custodial asset which I mentioned on the LB topic several times.
However I can’t agree on the Curve way to vote on gauge weigths here because we have different goals. Curve distribution subsidizes different assets whereas LB’s goal is to subsidize tez and by spreading the inflation to various pools we spread the liquidity.
Having one liquid asset would be key here IMO.

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186

Luke, I did not say Keefer lied because he disagrees with me. I’ve interacted with countless people who disagree vehemently with me without levying this kind of accusation. I said he lied because he did. It saddens me that he has fallen to this because I know all the work he’s put in with you in Kolibri, but at the end of the day you have to call a cat a cat.

Keefer knew BitcoinSuisse wasn’t the issuer because I corrected him, and he still kept calling them the issuer for rhethoric effect. That is a lie.

I would also like to address more directly your point about tzBTC not being trustless and the amendment introducing a degree of trust in the protocol.

Invoices have been paid to developers before, and this has shocked absolutely no one. Paying liquidity providers by inflation is no different. The risk taken by the protocol is limited to the cost it pays. Putting this money into a DAO and having it pick an asset as you suggest is not fundamentally different, you’re just passing the buck down the line.

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187

I said he lied because he did.

These are very strong words. Keefer got an implementation detail slightly wrong. Bitcoin Suisse is still the custodian and participates in a consortium that issues the asset. How credibly decentralized the consortium is will be left as an exercise for further research.

I agree that one shouldn’t assume malice without direct evidence, and of course I haven’t done that.

This also reads to me as “I have direct evidence so I’m going to assume malice.” You’re not assuming good intent, you’re assuming ill intent.

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188

No, I have direct evidence so I don’t need to assume malice to conclude it is. Not a high level of malice, I suspect he’s pissed off, but I’ve read enough to conclude he’s not acting in good faith. This is a compliment, the alternative is honestly worse.

189

Youngblood has a good point that we are bringing borders into a borderless economy.

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190

We’re not though. Paying for service providers with inflation was one of the motivating factor for the creation of Teams and is mentioned explicitly in the position paper. It’s completely immaterial if these service providers are software developers or liquidity providers. It’s also immaterial if the parameters are encoded in the OCaml code or in a smart contract code as Like suggests. The protocol is purchasing a service, nothing more nothing less.

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191

No, I have direct evidence so I don’t need to assume malice to conclude it is. Not a high level of malice, I suspect he’s pissed off, but I’ve read enough to conclude he’s not acting in good faith.

Keefer is one of the core developers of the highest volume token contract and DeFi protocol on Tezos to date (Kolibri/kUSD), and also a core developer of the Harbinger oracle which provides critical infrastructure to Tezos as a public good. Why would he not be acting in good faith?

In case you haven’t noticed, Keefer dedicated the last couple years of his life to Tezos, operating a baker and building a number of key public goods in the ecosystem. But you would like to show him the door because he is opposed to one aspect of a protocol upgrade on an ecosystem that prides itself for on-chain governance, and is trying to engage in good faith in a discussion about ways it could be improved.

This encapsulates some of the worst aspects of centralized power and authority that exist in the Tezos ecosystem today. The reason why “we can’t have nice things” is because every time some enthusiastic developers try to build them they are told very forcefully that their ideas are not welcome here, and that decision making authority will only be top-down, and not bottom-up.

For what aspires to be a permissionless, decentralized protocol, there seems to be an awful lot of centralized planning and gatekeeping going on…

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192

Thank you for the kind words, Luke.

I am acting in good faith. I prefer this argument would not devolve into debating my intentions.

I think there are legitimate points raised:

  • Luke’s comments about centralization and the ideas that TZIPs approve high level details, not implementation
  • my comments about conflicts of interest
  • the core argument that there should be options and the promotion period is a ratification phase, not the proposal phase.

I’d appreciate if we could stay on topic and debate those points with regards to what Granada upgrade will be, rather than trying devolving the argument.

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193

I have no pretense of knowing what motivates him.

So have I.

Of course not, and I said nothing of the sort. You are putting words in my mouth. If I see BS, I’m going to call out BS. Discussion goes both ways.

When you and Keefer worked with Jonas with the stated goal of making Tezos DeFi happen on Ethereum instead, I called it out. Do you have any other example?

After that, when you and Keefer built Kolibri, you asked me for help and I took the time to give you as much feedback as possible, gave you all the insight I could to help make you successful. I shared with you all the information for my own initiative in the space.

When Keefer asked me for help writing the code for Harbinger, I was also there if you recall.

Does that sound like top down authority discouraging initiative?

Posting all code publicly, writing blog posts to explain the code, creating RFC, posting them on on open forums, encouraging competing proposals is not gatekeeping.There are hundreds of developers and competing teams (who do not always agree or even get along) who participate in building the protocol and regularly, desperately, seek community feedback. Refusing to engage in the process and then being sour about it and crying centralisation is unreasonable.

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194

I have many thoughts on the above, especially on conflicts of interest, but am on mobile and I (unfortunately) have other commitments today.

Replying to the nuanced topics and questions presented takes time and effort to sit down and properly form a well written opinion. I want to make sure I do it with my full intentions; rather than shooting off ad hoc responses from mobile.

I hope the community will continue debating but stay on topic.

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195

Yes please, let’s dispense with the pissing contest and stick to discussions around Granada.

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196

It’s great to see a fired up founder passionate about improving the tech he built.

Keep it up Arthur.

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197

Agreed, let’s get back on topic here.

  • What do others think about tzBTC introducing some centralized risks at a protocol level?
    • Is this effectively mitigated by the 6 month kill switch?
    • How would we approve new liquidity pools to incentivize in future upgrades?
    • Could we develop an on-chain signaling method for incentivizing new pools?
    • How would pools eventually stop receiving incentives?
  • Is it appropriate to couple ratification of incentives to liquidity pools in the normal protocol upgrade process?

Here are some of my thoughts:

  • I’d like to see a lightweight way that bakers can signal support for a liquidity pool to receive incentives, here is an idea:
    • Anyone can simply deploy a new pool contract and provide a small amount of tokens as initial liquidity.
    • They can then attempt to rally community support for the pool to receive incentives
    • Bakers can signal their intent to support liquidity incentives for a specific pool by issuing some type of transaction/operation that gets stored in state
    • We set various thresholds for incentives, for example, something like:
      • 1% of rolls signal = 0.25 Tez per block
      • 5% of rolls signal = 0.50 Tez per block
      • 10% of rolls signal = 1 Tez per block
      • 25% of rolls signal = 2 Tez per block
      • 50% of rolls signal = 4 Tez per block
    • We could also define a maximum cap of Tez per block divided among all pools, so that even if hundreds of pools were ratified the incentives would be divided proportionally by the cap, to avoid excessive inflation.

What do you think? There are a lot of implementation details TBD, such as how bakers would signal, etc.

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198

To simplify what if each baker chooses their desired token-pair and when they win a block the LB from that block goes to the token-pair they chose. They can also pick null in which case the LB gets burned. Waiting in between protocol upgrades takes too long to react to market conditions.

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199

The total amount of tez minted in this proposal is 1,314,000 or 0.15% of the total supply. The proximate risk to token holders from a centralized actors misbehaving is essentially capped at being diluted by 0.15% without some or any of the liquidity provision happening.

Those who choose to directly participate in liquidity provision take on more risk of course, but they individually choose to do so.

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200

we’re not gonna have liquid tez with this approach, the liquidity is just gonna spread among the pools or not even appear as it’s easier to just sit outside and get baking rewards

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201

Yes but I don’t mean now, I mean in 6 months or 1 year when we no longer have liquidity problems.

202

it’s too early to think as if we don’t have liquidity problems.
Once we stop subsidizing it, the liquidity is gonna move on

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203

I think a lot of people keep incorrectly thinking of this as: “defi is important, let’s have a bunch of defi by subsidizing it” and not “liquidity matters for a cryptocurrency / SoV”.

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