merabin asks questions um how are the dow members going to get paid for the free work post exploit well that's ultimately up to the dow to decide so beanstalk farms we we've been talking to some of the members of with beanstalk farms about this and the expectation is that heading into q3 which i guess is starting almost immediately the protocol is still not on so there's really no budget to be had for contributors but the hope is that shortly after the protocol is back on uh the dow would vote to both fund continuous development of the protocol and potentially also retroactively pay some contributors uh for their work uh in the time that the protocol was off and and no one's been paid so that remains a very open question and one that the dow will have to collectively decide on the best way uh to move forward to ensure that the protocol uh is developed by a a high quality set of contributors that uh feel uh appreciated but uh today there hasn't been any any friction between beanstalk farms and the dow and being sprouted in the dow and no reason to expect that to change at this point given how amazing uh some of the contributors have been yes i know echo or um say as well that there are no delays or there are no work not happening um on you due to any any of that yeah which is amazing i agree okay um publish we we have three bfps uh that are out there and i think um at least two of them um are probably worth you know having having a bit of a discussion um around um i'll start with bfp77 which is you know the curve a factor or the the curve a uh parameter for the proposed uh being three curve uh pool can you maybe like take us or give us a quick summary of what does an amplification factor mean uh and what does a high amplification factor and implication factor mean before we dive in into um the one that we proposed sure so the starting point is that there's really two extremes uh in terms of how you can define curve for an amm there's the constant product which is what uniswap uses which is x times y equals k and then there's constant stun uh which is uh x plus y equals k and basically in the x plus y equals k what you're doing if the amm had that formula is trading one one bean for one uh three curve or one being for one l usd at all points in the curve and there's no change in the price and the x times y equals k is i mean in theory you could make it even more volatile but it is the it is a very natural curve that in short has a lot more volatility to it than uh the constant sum formula and so what curve did was as an innovation on uniswap's constant product amm was they effectively allowed for you to toggle uh some variation between the constant sum and constant product formula as some sort of uh combined formula with which to deploy your amn and the a parameter effectively functions as the relationship between the constant sum and the constant product formulas so a higher a parameter weights the constant sum more and therefore the price trades at a dollar uh or exactly at whatever it's pegged to for uh uh in terms of size of the trade relative to the liquidity a in the amn so uh as the a parameter increases you're gonna have less volatility in the price that you receive in the amm and as the a parameter decreases you're gonna have more volatility in the price on the same size trade okay so let's talk about two scenarios uh now one which is a high demand for beans and another one which is you know during a sell-off period what would a high a parameter do on each of those uh cases well the it's hard to answer that in short form because it would likely do a lot of things and what it would do would only be in comparison to other a parameters but in short the higher the a parameter at the same amount of excess demand or excess supply of beans in the pool the price would change less so in terms of the price of a bean at any given ratio of beans to non-beans in a in a curved pool uh the price that you will receive for trading against that pool despite the imbalance uh is closer to the peg as the a parameter increases so in practice what you may have is the being priced fighting closer to the peg while there is a significant imbalance in the pool and that has been the case with men for a significant period of time you can look and see that because they have a high a parameter in their main curve pool uh the mem3 curve pool there is a significant amount of mim in the pool compared to three curve but because of the high a parameter the price is pretty close to a dollar it's not a dollar but it's pretty close to a dollar and so the the real function of setting the a parameter properly is a question of how much volatility in the beam price is acceptable and the reason or one of the reasons why men isn't at a dollar is because of the freaking around amm fees and the fact that you have to pay a trading fee makes it such that it's not actually a perfect arb to arb the price back to a dollar it's only effective to arb the price back to close to a dollar once you consider the fee and that's one of the reasons why the pool hasn't rebalanced or to closer to par it's because of the high a parameter in the case of mim so the arbitrage that you would expect to make money from uh returning uh effectively conducting the arbitrage where you're redeeming assets for uh the mim for the underlying assets which in theory are worth at least a dollar that arbitrage isn't profitable because of the fact that uh there's transaction fees and that's why the pool hasn't rebalanced so in the case of properly setting the dna parameter or the beanstalk a parameter uh i guess it's probably the b three curve a parameter let's just leave it at that the question is well how much volatility is acceptable in the beam price and this obviously relates to in the case of peg arbitrage uh converts and when you consider that uh the go one of the goals of beanstalk is to incentivize a high amount of conversions within the silo to regularly cross the bean price above and below the peg it is a it's a the one of the main considerations would probably be almost counterintuitively while you'd expect a high a parameter to result in a lower volatility in the bean price when you think about the health of the system even though it's a stable coin protocol it's probably more likely that a lower a parameter is healthier for the system because it will facilitate uh more cost effective converts and therefore you're more likely to have oscillations above and below the peg which is the goal of being stock as opposed to having beans very close to a dollar but consistently above or consistently below a dollar okay maybe i can close uh the discussion around this proposal um with with one more question um so curve has one a factor that goes for the whole pool unisov v3 more or less allows the participant to choose you know how concentrated they want their liquidity to be in the pool itself one way to do this uh would also be you know for beanstalk to natively uh allow people to choose one to convert uh as well where do you see the future of convert uh going would it be something similar uh to you know a pool that's like unicorn v3 where then participants just choose how concentrated they want their liquidity to be or would it be something where we you know choose when to convert or like an auto convert at a certain price it's a very interesting question and it's worth noting that one of the primary maybe i should say one of the principles of beanstalk's design is that users are the ones that decide when to act and that the protocol as minimally as possible uh you know tries tries to minimize i should say tries to minimize the amount of open market operations that the protocol ever makes and in general having some sort of automated convert functionality or uh some sort of order book on the converts uh that's i mean the order books uh some sort of like uni swap v3 style because you think about unit swap b3 it's really you're bidding on your bidding so you're placing orders on a curve uh the concept is you could probably mimic something within the silo where people can say i'd like to convert at a certain price uh yeah that's probably reasonable to do but at the same time uh you want to minimize the extent that that's gameable or or arbitrageable and taken advantage of so not again i don't know if that in practice would go against the principle of the protocol not taking any actions you know in theory now the user is setting the bids but the question is in terms of execution is it being executed in a way where the protocol is losing uh you know paying paying some sort of market maker every time so that's what you want to avoid but the assumption has always been that other protocols are likely to build things on top of the silo and they'll likely handle converts in various different fashions so convert is is designed to be a base functionality such that assets within the silo can be moved around with minimal friction but beyond that uh how participants want to structure their silo exposure over time that's a very very open question i i agree with you convert as arbitrage and to each their own strategy i guess okay let's let's take some questions um here before we go to the second proposal hattersmith asks if there are any updates on the audits let's see if publish is around to hop up as they've been communicating mostly with the auditors i think not but the the latest update that i know of is no updates yeah hold on we'll see yeah maybe not i think that's where i invited up the wrong public so never mind i'm not sure where they are all right austin asks um why open market operations at the protocol level are not desirable well the main reason is that the protocol can be arbitraged so to some extent let's say beanstalk is at the protocol level willing to buy beans at 99 cents and sell them at a dollar and one cent like in theory that's great except in practice that's going to facilitate some market participants to take advantage of the protocol where they're uh they're basically there's no risk in holding the asset because the protocol will buy it from you at the at the the lower price and then there's no risk to shorting the asset because the protocol you can sell it back to the protocol at the other price so just when when it comes to what the protocol then is doing the protocol is basically taking the other side of arbitrary market operations with a spread and that's how you bleed out at the protocol level so in general you really don't want to have beanstalk being the facilitator of that and particularly when you think about uh what it is that prevents that from happening in general to participants in the system it's the randomness associated with when people convert when people buy at what prices people buy and sell and convert and therefore it's not easy to game and take advantage of particularly when you have a more sophisticated economy built on beanstalk with derivatives and such if you have at the protocol level some sort of guarantees that the protocol will buy at a certain price and sell at a certain price that's going to be taken advantage of and i think this is a main differentiator between other protocols that have let's say on liquidity and then they have rules on on what to do when but being stocked then is it provides an ecosystem where it allows the market participants to to to react or do do these uh actions is that is that correct yeah i mean we've been trying to look into a little bit more closely how fracs actually implements their amos and uh have not have not had a lot of success at getting to the bottom of that at the technical level but in theory they seem to be profitably performing uh market operations which is uh you know it's fascinating so the question is how are they actually implementing it so not we never like to say things are impossible uh because people tend to innovate and build cool shed so uh just to say that from a principal design beanstalk assumes that that it can't uh efficiently operate on the market and the only time being stock does operate is during a season of plenty which according to one of the proposals is now being renamed a flood uh the protocol dumps beans on the market and the concept is everyone should front run the protocol and sell in which case the protocol wouldn't mint any beans so the only way that beanstalk is selling beans on the open market is if no one is willing to sell whatsoever so those cases are very rare and therefore it's unlikely that a flood happens in most cases but that's the general concept is to minimize the amount that the protocol is acting because it can be taken advantage of but clearly for access some sort of innovation in terms of execution and would you say the season of planning is there to maintain peg not to profit so you know it doesn't it doesn't do that because this is a profitable opportunity it's there to maintain peg correct okay better bean follows up in the earlier question about contributors compensation asks will beans be ripe or unripe again it's not really up to us per se uh or at all uh i think beanstalk farms does have something like two million uh unripe beans uh and then any any i guess ripe beans or normal beans whatever you want to call it uh that that would have to be minted via a noob dao proposal so unclear at the moment okay we've reached the end of the questions if anyone else has any questions just write them at the town hall chat let's go to bfp78 which is the minting schedule upon replant so what bf78 says that upon replant the minting uh capacity is going to be at zero percent and that's going to increase by one percent per season for the first 100 seasons until it reaches you know full capacity of 100 percent why why is that logic uh put in place but what's the thinking behind this so there's a couple things one any season with an unpause uh the the the price the delta b is is zero and therefore there shouldn't be any mint in the first season or until the start of the first season and and the beanstalk really mints at the end of the season so the question is at the end of the first full season how many beans should be minted and it's worth noting that the protocol had a delta b of like 5 million or so at the time of the attack in terms of a shortage of beans in the pool and let's say the protocol relaunches with the 10 10 million dollars in change that it has right now which is something like 12 13 of the total you're talking about a delta b in the pool of 550 000 550 000 beans and the concept is that you really wouldn't want the protocol to start minting 500 000 beans a season given that in reality uh there's not any any ability to sell right because when the protocol restarts all of the recapitalized liquidity is going to unrape assets that cannot be uh recovered or i shouldn't say it cannot be sold right if you chop your unripe assets and take the underline and you sell it the amount that you're going to receive at the beginning uh is zero percent so there's not act and there's not going to be any pods harvestable until the end of the first season so the concept is there's no cell pressure until the first season and if the first season there's 500 000 uh beans of cell pressure you know i think the the punch line is that it's unreasonable to expect the market to be that efficient where after one or two seasons the whole thing will reprice itself and the minting will go towards whatever the the actual number of beans that need to be minted or soil that needs to get minted and allowing that to play out over 100 seasons and gradually scale up over time is a much more conservative way for the protocol to replant so that the i guess the original idea came from the fact that when generalized minting was going to go live and minting based on the bean 3 curve was going to go live a similar effect was in place because it was a 5 million delta b effectively in the pool or close to it most of the the delta b was from the curve pool and so the concept is you can't just go from minting x to minting 10x that's a crazy change so you got to scale things over time and uh that applies to generalized minting or it would have applied to generalized minting and now but it would have made sense to have implemented that and now since we're launching well it's it still makes sense to do that okay and what's the worst that can happen uh here um so we're limiting um the the minting uh you know the maximum output of it what's the worst that can happen if we have like a sudden you know high demand and we're not minting enough yeah i think that's the only risk right is that there's excess demand for beans and the protocol isn't minting enough beans to return the beans to the peg but that is a i mean that's like a a it's a great situation if there's excess demand for beans uh to that extent but b that just it's not a problem for beanstalk and particularly given that it will have a scaled minting schedule if the minting doubles or triples or quadruples it won't have any effect because the minting is still being scaled so the the concept is you allow over four days the market to price itself and maybe beans are worth two dollars uh maybe they're worth 50 cents but you got to allow the market to price itself over time and uh given that the the minting schedule would really only affect the supply side the risk is that the bean price pumps too high and given given the way that the the unripe assets will still be able to convert for example and you will have fertilizer being paid back and pods being paid back as the minting schedule increases there's no reason to expect that sufficient supply to return the bean price to a dollar won't be minted over time and it is worth noting that since the protocol is going to start at 500 000 beans or so above peg let's call it that uh you can't have you can't have it minting a half a million a half a million half a million half a million a day and then the price collapsed to 80 cents you know that's so so to some extent you risk the price going higher due to the the minting schedule that increases over time because you you risk potentially inorganic demand uh catch and hold in the early days but you'd really expect it to turn into mostly demand for fertilizer particularly over those couple of days while the minting schedule is scaling up as opposed to turning into demand for beans so it's not exactly it's just you have to play out what is actually realistic and it seems like the safer course of action when evaluating how likely it is to have the system over print upon replant it's it's it it's much more likely to over print if you start at 100 likely and and it's a problem that will solve itself anyways with every hour so every hour it gets better or it diminishes the problem for 100 hours okay that summarizes uh both bfps 78 and 79. we also have um the last one which is a change in terminology all of these are are up for voting i'm actually i'm not sure if the last one is uh the term knowledge one is is up there that's not yet but the other two proposals that we discussed which is um the a factor and the minting are out there for voting till till july first all right publius they have we have discus discussed this um um recently a bit and there is a continuation of that discussion which is about the being ace uh pool and then the possibility of you know um um allowing uh convert between those pools can you take us through the thinking right now what are we thinking about the surrey plant then being if then what well there's a lot of there's a lot of different questions right and to some extent the liquidity pools let maybe let's just answer the liquidity pools exclusively for me uh and we can talk about what else makes sense to put on the roadmap for after a b pool but just thinking about what other pools it makes sense to whitelist over time so there's two different functions that a pool really has in the case of beanstalk or that it can one is as an oracle uh for a us dollar and the other is at as some sort of exogenous source of value and ethereum as we're all seeing uh or being reminded of uh once again uh is very volatile and while beanstalk launched with the beneath pool and lived and died by the early eighth volatility it was certainly a pain in the ass in the early days and as the being three curve pool grew in magnitude relative to the being equal in terms of liquidity the effect of the ethereum price on the beans the bean price decreased which was great for stability and for efficient price price discovery now at the end of the day though the problem is that three curve is largely centralized and usdc and usdt are centralized and then dye is largely backed by usbc which is centralized and so unfortunately it's it's kind of a deal with the devil right uh any of the exogenous value that beanstalk accrues in liquidity pools uh that is in the form of three curve at some or any point could be rubbed um and the that's that's that's a major issue when you think about the short-term stability of the bean price and while you have e volatility that affects the bean price you know it's it's hard to it's hard to say that some volatility is better than an all or nothing like it's very clearly that some volatility is acceptable and or preferred as opposed to all or nothing so the being pool is very important then you think about what other value is decentralized and less likely to go straight to zero it's either a one or a zero l usd is very interesting although the amount of exogenous value you can have from lusd is very correlated to the ethereum price and limited by the ethereum market cap so it's if you're looking for exogenous value in size it's sort of hard to know where that comes from particularly if you're looking for decentralized exogenous values so this is one of the i think when you're when you take a big step back and look at the the major philosophical questions to answer about beanstalk it's where does exogenous value in size come from to provide liquidity for beans and how to make it such that how to make it such that the the exogenous liquidity available scales with beanstalk and i think you could make the argument that at real scale the ethereum price starts to be really affected by demand for ethan these liquidity pools and therefore the exogenous value can scale but that's a highly uh you know that's a feedback loop that can unwind very quickly and if you have the interest rates on beans that are uh causing there to be demand for eat when when you have short-term interest rates for beans decrease that's going to decrease the amount of uh desire to hold e to a to receive those interest rates and that's going to cause a decrease in the price of ethereum again assuming this is all its size and that creates a negative feedback loop whenever that starts to unwind and that's what you really want to avoid so the question is how do you how do you both minimize your exposure to ethereum and minimize your exposure to centralized uh stable point options as more stable sources of exogenous value these are you know this there's a couple different ways to go about answering it but they're all at this point in time imperfect yep thank you uh for the answer i i have a question um that's that's more evolved around what's happening in the overall um on defy space right now and we're seeing that a lot a lot of markets were a lot of let's say entities are are having a challenge which is mostly attributed to to leverage or high leverage and we've had you know a lot of people didn't think that prices would crash you know this low and you know many of them got liquidated and this liquidations you know caused a further uh spiral down and we would say that most leverage comes from you know what we would think speculation or driven by inorganic demand the the thought that you know this is going to you know come up with more and more and people get leveraged on that what can beanstalk do to and and we do this as already by not incentivizing inorganic demand but what can benzo do to limit or inhibit that uh you know that speculation let's say and and is that even possible do you think you know can can can even do that so you can't limit the speculation but what you can do is minimize by design or in practice the amount of the demand that is speculative demand and so what else is there other than speculative demand and that's one of the reasons why you're seeing so much unwinding happening in the current state of defights because it was basically all leveraged speculative demand well beans and the interest from beings currently is all from speculative demand the interest that you receive is from people buying beans and the reason they're buying beans is because of the interest rate and to some extent it is very important that in the early days bean stock in order to establish beans this money works without having any real economic activity happening within the system and it first establishes that the model at its core works purely from incentives but and this is a big but excuse me in order to move away from just a purely closed speculative system you do need to start to have real economic activity happen within beings and given that the main attraction of holding beans and using beans is the interest rate for holding them in the silo it's highly likely that that economic activity is going to happen on top of the silo so betting markets on top of the silo to me stands out as uh the biggest uh potential real economic activity that can happen in the short term on top of the silo and over time as beans become more stable it's very possible that trade and commerce start to be denominated and take place in beans because of the ability uh to receive yield and the stability in the bean price which makes it a very attractive currency to use but you got to start somewhere and it's likely that the exogenous demand or the real economic activity uh that is organic let's call it and not from just the the and we've used inorganic and inorganic organic and inorganic demand differently let's talk about demand to use the beans for economic reasons other than just holding them in the silo that is likely to to decrease the amount of speculative demand as a portion of total demand if that makes sense yes i'd like to follow up on this so we said there could be two reasons uh for demand for beginners one is speculative and then the other one is to use it you know as a stable con or use it as a sort of value um do you think it makes sense and i'm thinking loud uh here that let's say you know if the price of uh being is above one for a certain period of time then any new demand that comes in doesn't get senior age or gets less inertia for a certain period this allows uh the use of being as you know as a medium of exchange or a sort of value but but not so much attractive anymore for speculation so first i just push back and say you can also have beans used as a medium of exchange and uh perhaps the one of the cool things about beans in the silo is that they're both a store value and a medium of exchange and they're they're stable in denomination and accrue interest which makes them very unique now in terms of limiting minting to new users in this new depositors in the silo on the one hand that may create a decrease in inorganic demand uh when the price is above one which is attractive but on the other hand it may create some sort of misaligned incentive to keep the price above one if that makes sense now it's it's probably not likely that at the margin any one party is going to have enough of the silo such that it's meaningful for them to keep the price above one uh instead of letting the price oscillate normally in line with uh whatever whatever the supply and demand is at the time but what once if you if you if if people were around in the early days around the season of plenty uh it's very hard to coordinate uh all of the silo members uh to keep the price below a dollar to reset the rate and that's one of the things that in in an efficient market you really don't want there to be reasons for people to be buying and keeping the price too high which which sometimes plays out because of the some sort of rule written to the protocol like that so would have to think a little bit more about it but uh if anything the implementation that of a sim achieving a similar goal that probably makes more sense although is likely more difficult to implement is that the beans that are paid as senior age uh are received over time and so you know you receive them over a certain number of seasons and if you deposit quickly and withdraw quickly then you obviously receive a lot less of the scenery than you would have because it's paid out over time but multiple ways to skin this cat okay there's a question also in the economics channel under something that we've discussed maybe you can give us a summary a bit of it which is again what does positive carry mean so positive carry is the cost to holding a position well i should say carry is the cost of holding a position and so positive carry means that you get paid for holding the position which is the case for beans that you're holding or lp tokens that you're holding in the silo and the the concept is that being long beans or holding exposure to beans uh comes with uh some sort of payment in the form of being interest which you're so you're getting paid for holding the position which is positive carry so would you say that it is um depending on the currency that you can have um if the expansion of it increases who gets paid for it would it be would it be something as such so let's say i'm holding you know some usdc and then the market cap of that it increases uh then there is a cost for me to holding it that i should have or could have you know done something with it uh and i don't get any of that uh growth of it one on the other on the other hand having something such as the silo or the senior hbase system those who are participating in it are the ones that capture the growth of it and this is where the positive care comes from so who gets paid when the currency is basically used well i think we might be mixing a couple different concepts here uh where the where the carry comes from that's an interesting question in and of itself uh in the case of beanstalk uh it obviously comes from bean senorage which is inflation but unlike another protocol like ohm for example where you could make the argument there's positive carry because you're getting paid tokens to hold the position the the payment of the the carry for holding the position is independent of the price or the value of the position and so you're actually taking a trade on the carry relative to the change in the underlying which i guess is the trade you're making in every case and also in the case of beanstalk but because beans are only minted when the price of a bean is above a dollar there's some expectation that the senior age that you're paid uh is interest as opposed to uh some sort of uh financial outcome that either you won the carry trade or you lost the carry trade uh because of the the change in value of the underlying so because the bean senorage comes by rule only when the bean price is too high uh you can it and again it's it's just different ways of thinking of similar things that are happening but the the interest that you're paid or the carry for holding the position that you're paid only comes about when the value of the underlying is stable so you could make the argument there's a and there certainly is still risk in the the price of the bean uh changing and that's the risk of the trade uh relative to the carry that you get paid for in in terms of being senior age but the i i think the the the classification of it as positive carry is fair uh given the fact that you're receiving the interest by rule only when the price is too high okay thank you for clarifying that um salon asks what is the upper bound on the replant timeline do we have a deadline that we you know we have we have to restart there or no no upper bound i think everyone is working as hard as humanly possible to get make sure that once the audits are complete there's no uh additional issues uh obviously the goal is to to replant properly and without any major hiccups and so however long it takes to get to the point where that is the case it'll take what it'll take the you know i certainly don't think that this will push us into like something crazy like q4 but you know and let's say this sort of in ad absurdum uh if it if it took that long it would but betting obviously the heavy under that hopefully uh sometime in july we'll be able to replant this bad boy uh there's the protocol was was launched originally on august 6th 2021 uh it would be painful for us if it was if the 2022 launch was after that so not not a strict upper bound but uh i mean that's still five five weeks away or so we would certainly hope it would be before that a mental upper bound amir huddleberry asks what's the team's thoughts about regulatory risks and what the response might be when the pressure comes well there's always going to be risk to in terms of the effect of the bean price and the risk of holding bean stock assets if for example governments decided to make holding those those assets illegal uh but that aside uh or maybe another risk would be uh the operators of usdc being forced to blacklist the usdc unit swap pool or the three curve pool uh those types of things certainly pose risk to beanstalk in terms of how the protocol currently functions but not existential risk because the protocol could change and react uh and derive its price from from other places even if the the peg may be slightly less accurate you can get a decentralized uh price for a dollar in in almost all cases the question is really uh what is the realest what is the likelihood that any of those issues to usdc happen for example uh or or in a more extreme case people are banned from holding crypto assets or beanstalk assets uh but that aside bean stock doesn't really care so being stock is a piece of software that exists on the ethereum blockchain and is autonomous so uh upgrades to the protocol unfortunately currently aren't fully permissionless and autonomous but other than that you know there's no reason for the protocol to change uh and and implement things that the government would wanted to implement the goal of being stuck is to be totally free from any and i mean i guess the government could it's a proof of stake system so the government could buy enough stock to to implement bits that would that would enforce certain laws that they wanted enforced but that aside there's no way for the government to impose these things on beanstalk so being stock is designed to be resistant to any sort of regulatory pressure of any kind of berry asks koscium at pressure and same answer yeah okay i think this is the end of the questions um and you know what i also had in mind to discuss so we can give it a minute if anyone else has another question or someone wants to come on stage otherwise we can call it class okay publius always a pleasure thank you for taking the time and see you in next week's next week's class thank you mad talk soon bye