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I'm sharing a personal opinion on something we kinda hear often in the ecosystem: "Protocols governance is a plutocracy, DeFi is a whale Game, it's same as OldFi"
let's check that for whales/fish/shrimp sizes
[opinions my own required disclamer]
let's check that for whales/fish/shrimp sizes
[opinions my own required disclamer]
Yes, in most protocols governance, we don't have 1 guy = 1 vote but 1 token = 1 vote.
First of all reminder on why:
on a decentralized, permissionless, pseudonymous based public blockchain, Sybil resistance is extremely hard, it's trivial with code to create many addresses
First of all reminder on why:
on a decentralized, permissionless, pseudonymous based public blockchain, Sybil resistance is extremely hard, it's trivial with code to create many addresses
that's why the best consensus mechanism is Proof-Of-Work, 1 hash = 1 lottery ticket, want more chance to win on average? stack up on computing power.
this system is incredibly resilient.
Miners are doing honest work since 2008
this system is incredibly resilient.
Miners are doing honest work since 2008
With tokens, no need to try out a bunch of nonces until bingo, tokens have intrinsic value and you can stack them for more voting weight.
So yes whales have overall more voting weight than small guys.
but their voting weight per token is exactly *the same*
So yes whales have overall more voting weight than small guys.
but their voting weight per token is exactly *the same*
If some decision is awful for the protocol, everybody big and small end up on a pile of tokens that are much less sexy on the markets.
you might wanna say that, for whales, their $ risk _per token_ is the same? so all things are equals just on different scales?
Yeah but no.
you might wanna say that, for whales, their $ risk _per token_ is the same? so all things are equals just on different scales?
Yeah but no.
What's often overlooked is that 
have more at risk than small guys.
if the TVL meme is so important for AMMs and the concept of Depth crucial for any exchange it's because a small guy often can get out with a negligible slippage
Whales? not that much.
have more at risk than small guys.if the TVL meme is so important for AMMs and the concept of Depth crucial for any exchange it's because a small guy often can get out with a negligible slippage
Whales? not that much.
Especially in "small" tokens (pool2 of farms, new projects with a low presence on CEXs and low liquidity on AMMs)
if things go bad, pools and order books dry up quite quick
LPs of Pools2 of farms already beaten up by IL and yield collapse are not too happy,
so they leave fast.
if things go bad, pools and order books dry up quite quick
LPs of Pools2 of farms already beaten up by IL and yield collapse are not too happy,
so they leave fast.
So recap :
Whales?
Same vote weight per token but not the same price exposure per token, due to probable higher slippage if things go bad, their risk is actually higher per token.
Whales?
Same vote weight per token but not the same price exposure per token, due to probable higher slippage if things go bad, their risk is actually higher per token.
Also, it's less true now that DeFi is bigger but if whale earning per token is the same
they're less mobile because their footprint is huge!
DAI yield is 10% in protocol Y compared to 8% in X?
Too Bad,
if you move your money, you crash the rate and now protocol X APY is 6%
they're less mobile because their footprint is huge!
DAI yield is 10% in protocol Y compared to 8% in X?
Too Bad,
if you move your money, you crash the rate and now protocol X APY is 6%
Same with small farms,
yeah they probably know about the new vegetable in town, but if they jump in:
1) farms give out a fixed amount of token per block so APY per $ of liquidity crash.
2) whales collect more tokens and weak pool2 can't sustain their dump, so APY collapse.
yeah they probably know about the new vegetable in town, but if they jump in:
1) farms give out a fixed amount of token per block so APY per $ of liquidity crash.
2) whales collect more tokens and weak pool2 can't sustain their dump, so APY collapse.
Also Pool2 (ETH/FarmNative) is way more profitable (often 2-10x) than ETH/tokens pools, but whales can't really join in small farms as they get IL and will have a hard time to sell their 50% bag of the native token when the times comes + slippage to get in.
Fishes don't care, on medium size bags, they often can recoup their initial buy of native tokens in a matter of dozen of hours/days.
then, they can simply run on profits or switch farms so they can jump in profitable but high-risk pool2.
but let's not cry too much for whales...
then, they can simply run on profits or switch farms so they can jump in profitable but high-risk pool2.
but let's not cry too much for whales...
Compared to shrimps, the gas cost is negligible in % of position for them, shrimps are basically locked in the options where they can stay for weeks because the gas cost can represent several %s of theirs bag.
At the end of the day, Fishes :
1) The gas burden is manageable, they are mobile
2) Pools2 are accessible
3) slippage is still often low.
4) if they play their card well, they might end up with a significant bonus on their portfolio performance (with acceptance of high risk)
1) The gas burden is manageable, they are mobile
2) Pools2 are accessible
3) slippage is still often low.
4) if they play their card well, they might end up with a significant bonus on their portfolio performance (with acceptance of high risk)
my hot take is that medium size portfolios have the biggest potential in DeFi in terms of opportunities.
With DeFi growth, more doors will open for whales, but higher gas costs will hurt the shrimp more.
Scalability with composability will help
but won't change much for
With DeFi growth, more doors will open for whales, but higher gas costs will hurt the shrimp more.
Scalability with composability will help
but won't change much for
Why I don't give numbas of what's a , a or a 
?
Because it highly depends on gasPrices and overall liquidity.
50k$ is a in a 1B$ protocol, and a in a 500k$ farm, 2000$ is small with 10/50 Gwei gas prices and a with 400 Gwei...
, a or a ?Because it highly depends on gasPrices and overall liquidity.
50k$ is a
in a 1B$ protocol, and a in a 500k$ farm, 2000$ is small with 10/50 Gwei gas prices and a with 400 Gwei...
That's why I love @iearnfinance yVaults so much, it's basically a farmer COOP.
A bunch of can turn into a big fish and mutualize gas costs to make them negligible per user.
mandatory cliché picture :
A bunch of
can turn into a big fish and mutualize gas costs to make them negligible per user.mandatory cliché picture :
The only potential issue for yVaults is being a victim of their own success, too many and you're now a
bye bye small farms, and as yETH showed, you need to focus on scalable strategy, leaving big APY opportunities on the table.
and you're now a bye bye small farms, and as yETH showed, you need to focus on scalable strategy, leaving big APY opportunities on the table.
I'm not too worried about the chad team,
The solution is "simple": incentivize strategists and have a bunch of dynamic capped sized vaults,
not many forming one huge but several vessels to have multiple fish moving in different directions.
The solution is "simple": incentivize strategists and have a bunch of dynamic capped sized vaults,
not many
forming one huge but several vessels to have multiple fish moving in different directions.
Yeah, if you're a seasoned farmer, this thread might sound like a captain obvious one. but given that I see always the same comments come back, it might be useful for some.
Your opinion and additions matter as well on this topic, maybe I'm dumb and might learn something
Your opinion and additions matter as well on this topic, maybe I'm dumb and might learn something
