As a result, liquidity providers on Saddle, which focuses exclusively on pegged value assets, have little risk of temporary loss and can earn competitive APRs on their investments. For example, our D4 pool, which consists of the stablecoins FRAX, FEI, LUSD, and alUSD, has one of the highest yields for stablecoins—over 40%!
I contacted Sunil Srivatsa, the creator and CEO of Saddle.Finance, a decentralized automated market maker based in Ethereum, for the 29th installment of Unhashed. Sunil clarifies different facets of the crypto ecosystem and its increasing security in this interview.
Welcome to Unhashed. Please share with us what got you started in the crypto space and how you started with Saddle.Finance.
Bitcoin was initially brought up to me by one of my pals in 2011. In 2016, Ethereum and the DAO rekindled my interest as an innovative method of managing capital. A significant contributor at Yearn by 2020 (still on the multisig! ), I eventually bought some Bitcoin and Ethereum in 2017 and began participating in numerous communities.
Being an avid tBTC staker and community member was how I first got in touch with the Keep community and Thesis*. Later, Curve released their source code under a very stringent license, and we saw a chance to create and distribute an open-source StableSwap implementation, which is how Saddle came to be. Our goal is to create DeFi the proper way—open-source, collaboratively, and as a real building block that everyone can utilize.
The boundaries are being pushed at a dizzying pace by dynamic innovation, a crucial characteristic of both the crypto and DeFi businesses. What do you think about this characteristic being a cause of the infamous market volatility? Also, if you could say a few words about the significance of sustainable innovation.
The speed of innovation in cryptocurrencies undoubtedly adds to their infamous volatility. Protocols must be carefully thought out and resilient due to the adversarial nature of decentralized finance and innovations like flash loans (which decrease the capital barrier to committing exploits).
You might be aware that Saddle was recently the target of a million dollar cyberattack. Although it was challenging, we overcame it and came out of it as a stronger team and community while stepping up our security and auditing. Our TVL, engineering velocity, and community participation are all rising once more despite the weak market. One of the factors contributing to the exponential growth of crypto/DeFi is what I refer to as resilience in DeFi. Attacks and bouncebacks are frequent enough to really improve the ecology as a whole by weeding out ineffective protocols and recycling talent.
I anticipate that more standards will take into account the growing popularity of ESG (Environmental, Social, and Corporate Governance) and sustainable investing (e.g. Solana was carbon neutral for 2021 and Algorand announced it will be carbon negative for life).
Users are hesitant to provide liquidity on AMMs due to the risk of impermanent loss which is growing in frequency. How do you think this issue can be mitigated without the need for a trust-based custodian?
Only pegged value crypto currencies are included in StableSwap automated market maker pools, which lack trust. Users can receive trading commissions and bonuses as a result, with little risk of temporary loss.
As a result, liquidity providers on Saddle, which focuses exclusively on pegged value assets, have little risk of temporary loss and can earn competitive APRs on their investments. For example, our D4 pool, which consists of the stablecoins FRAX, FEI, LUSD, and alUSD, has one of the highest yields for stablecoins—over 40%!
With staking and community governance going hand-in-hand at Saddle Finance, how do you plan to weed out short-term profit seekers and ensure sustainable price actions?
Due to its 4-year locking mechanism, the vote escrowed token and gauge scheme for incentives has historically been effective at eliminating participants with a short-term preference. Additionally, the community just approved SIP-24, “Update SDL Allocations for veSDL Gauges and Ondo’s Liquidity-as-a-Service Pool,” which reduced SDL incentive and liquidity allocations in light of recent market developments and events.
We anticipate that most SDL holders will lock and vote escrow their tokens once SDL transfers are made possible with the introduction of veSDL (per SIP-8: “SIP-8: SDL Unlock, Tokenomics, and Liquidity”) in order to support the protocol’s long-term survival.
In essence, veSDL rewards long-term stakeholders with more governance authority while giving little to no voting power to short-term profit seekers.
With a strong feature roadmap, increased utility for SDL tokens, and integrations with Tokemak for more liquidity and incentives, Olympus Pro for bonding and protocol-controlled value, Rari Capital and Fuse for leveraged yield farming and borrowing against LP tokens, as well as airdrops and fees from protocols forking and building on Saddle, we’re making it more and more appealing for investors to choose to purchase, hodl, or leverage SDL.
From an infrastructure point of view, we still are predominantly in an era of fragmented liquidity and non-interacting blockchains. What do you think about this status quo and the efforts being made to redefine it?
By demonstrating to our parents and grandparents how to utilize a hardware wallet and browser extension to interact with dApps, some people think that web3 may gain widespread adoption. Without losing any user experience, I think we’ll have the sleek apps that people are familiar with and love today but that are actually powered by web3. Though not quite there yet, the space is currently progressing toward this seamlessness.
In order to reduce fragmented liquidity, Saddle is strategically moving toward support for major blockchains (most recently Evmos, in collaboration with important players like Diffusion Finance). We also periodically evaluate cross-chain opportunities (for example, PoolTogether v4, which supports deposits across multiple networks into a single pool).
Transitioning Saddle Finance into a DAO seems to be the long-term goal for you. What are some of the actionable steps that are being taken to facilitate this transition? Currently, how can the community engage and contribute to the protocol?
The Delos HQ multisig members’ function is to allow the community to earn SDL while assisting in the survival of the Saddle Protocol, and our community recently passed SIP-23: “Delos HQ Elections – Round 2.” A community grant program will receive a total of 1 million SDL from the multisig. Syndicates, bounties, and continuing payments to essential contributors can all be funded with the help of these money. In order to develop and support the Saddle community, Delos HQ was the first community “syndicate” (i.e. subDAO with grant+multisig).
We’re also working to create a strong pipeline that will allow community members, or “bandits,” to gradually get more involved with the Saddle DAO while being rewarded for it with $SDL grants (alla Delos HQ; this is an example of experienced community members mentoring and supporting new community members). From bandits through ambassadors (stallions) to primary contributors (wranglers), community members effectively “level up.”
With time, we hope to give Saddle DAO contributors greater bags, more significant responsibilities, and ultimately the opportunity to start their own subDAOs or syndicates to expand the community. It’s an enjoyable and moral cycle.
Check out the Saddle Ambassador Program, post on the Discourse thread, and join the Discord if you want to get involved!
With regards to the crypto market; from speculative interest to utility-driven pursuits, what are the key factors that you think are required for this transition to materialize?
In my opinion, fundamentals will take precedence over story as the market develops. Token Terminal is a terrific tool for visualizing a lot of this data.
This shift is built on protocols that offer new value rather than simply copying and pasting the same dApp from one network to another. In the case of Saddle, we’ve made StableSwap open-source and available, a DeFi basic that every ecosystem need. There is now an open-source implementation of Curve in place of the original version’s restrictive license (and Vyper) (and in Solidity). As powerful cross-chain bridges, the Hop Protocol and Synapse are two unique, utility-driven protocols that we have assisted in enabling.
We’ll make this shift faster if more builders concentrate on the basics (i.e., providing new value).
