• Recordings
• Notes
• Would time locked deposits work with the Silo?
• Why is the withdrawal timer the same as the flood timer?
• Why have Beans in the Silo vs. just LP? Should there be forced conversion to LP when above peg?
• What do you think about using ZK-proofs for secret ballots for governance?
• What does Beanstalk look like at scale?
• Transcript

Recordings

Notes

Would time locked deposits work with the Silo?

• It is interesting, because one of the purposes of the Silo is to minimize supply when price is below $1.
• Locked deposits would limit the amount of supply at any given time.
• That locked supply functions as an overhang on the system.
• It creates inefficiency in the market and may exacerbate downside volatility.
• Nothing wrong with protocols on top of Beanstalk implementing it, but the goal is to keep the native Beanstalk protocol as simple as humanly possible.
• We wouldn't be in favor of anything that adds friction or inefficiency to the protocol.

Why is the withdrawal timer the same as the flood timer?

• To minimize inorganic demand from people buying BEAN above peg to profit from seignorage.
• It prevents people from buying BEAN and withdrawing before the flood pushes prices back down.

Why have Beans in the Silo vs. just LP? Should there be forced conversion to LP when above peg?

• You want to avoid having the protocol make any decisions at the market level or doing open market operations.
• The flood is the exception, in which case the efficient thing to do is not participate.
• The goal with convert is to facilitate efficient price discovery of BEAN, but if you automate conversion you lose that price discovery.
• Another situation where it's fine to be implemented on top of Beanstalk, but shouldn't be built in at the protocol level.

What do you think about using ZK-proofs for secret ballots for governance?

• It's a philosophical question about whether more information is always better to create a more efficient market
• For example, in the case of CDPs with liquidation points: is it more efficient for people to know these positions and possibly hunt them, or is it more efficient for people to just make directional bets without that knowledge? There is a good argument for both sides.
• With voting, we prefer anonymous voting at the ballot box, but we want to know how elected officials are voting in Congress.
• Not a one size fits all answer.
• Tend to assume that things will trend towards privacy as the tech enables it.
• Over time it privacy technology might spread beyond governance to things like the pod marketplace.

What does Beanstalk look like at scale?

• One argument against Ethereum is that it relies on exogenous value, from the use of its compute.
• There can be risks to both Ethereum and Beanstalk if Beanstalk grows large enough that the value of Ethereum relies on value created by Beanstalk to some extent.
• At some point it might become necessary for Beanstalk to become its own network with its own validator set.
• That has its own risks, including maintaining validator integrity through downturns.
• It would all be very far down the line, and great problems to have.

Transcript

we're gonna do a hard migration over to uh beanstalk university and mod do you wanna just kind of kick it off and run for the next 20 minutes and maybe longer publish last time let's let's do it hi publius how you doing sir doing all right ready for some questions always always right let's let's start with some of what has been discussed in the economics channel um over the past week um so this is a new iteration of permanent deposits and the idea now is timed uh deposits with the thinking being what if we have you know something i guess similar to what convex and curve does where you can deposit into the silo for like three months six months one year whatever the time period is and and depending on the on the length of that period you get let's say more more seeds uh than other how would you compare that to the stock system do you first of all see them complementary or completely different and if if they're different then you know how different are they and if they can work together how can they do that well this is a this is a great question and i think the permanent deposits idea keeps coming back because the there's nothing wrong with protocols built on top of beanstalk locking deposits for a period of time and therefore implicitly the assets are locked but the the question that keeps being asked is instead one of whether at the protocol level bean stock should support uh lock deposits and if it supports lox deposits then it needs to pay for the lock deposits or incentivize the locking of the deposits for some reason and if we think about what the goal of bean stock is with the silo it's to minimize the two things one inorganic demand when the price is too high and two the amount of uh run on the bank or the excess supply when the price is below a dollar and on the one hand locking the deposits certainly helps with the ladder uh in the sense that you there's a fixed supply schedule so you don't know when well you know exactly when it's going to come due and therefore there's a limit to the amount of supply that can be sold at any given time but on the other hand and this is a big thing on the other hand uh that that lock supply sort of functions as an overhang over the system right where if you think about the function of withdrawals one of the big problems with the withdrawal freezes that now you have like this period of time four or five hours where there's known cell pressure that's coming but it's coming in a period of time and therefore in the intermediate period it's it's unclear what the efficient buyer should do should they wait until these withdrawals withdraw and sell should they buy now and so now what should they do and the overhang the fact that the market sees that there's this cell pressure that's coming or expected separate highly likely cell pressure that's coming that's you know that that ultimately creates an inefficiency in the market and so if we go back to what beanstalk wants beanstalk wants the most efficient market possible so it even though we may think uh it may be intuitive that uh locking assets is better for stability in reality it's more likely to exacerbate downside volatility uh when it happens because it's going to make it more prime for things to unlock at certain times and release and again we go back to how we started uh there's nothing wrong with protocols on top of bean stock uh locking things for a period of time or having liquidation prices and things like that that's highly likely but the concept is from a beanstalk native perspective the goal is to keep the protocol as simple as humanly possible such that the value of the credit of the protocol and the value of the beans is truly endogenous and you really only get that if you have the simplest possible core mechanism so the more uh the the more i i wouldn't even call this like a bell and whistle uh like the the improvement to the soil market so that its pods are more distributed that actually is an improvement to the protocol this i would say is more of a misguided it it misses the the point of the system which is to be as low friction as possible and there's no reason for the protocol to pay for this friction uh one thing that we we i mean if it were up to us we'd get rid of the withdrawal freeze all together uh it's not really uh realistic to do that from an implementation perspective at the moment it's more realistic to remove it down to one season so uh but but like the point is the overhang is economically inefficient and we wouldn't really be in favor of the introduction of any future overhangs in any capacity thank you for the detailed answer i i had a few follow-up questions but i think you covered them all um anyone in the audience as well if you have questions feel free to throw them in the town hall chat otherwise we'll continue the discussion there austin follows up uh published and asks why is the withdrawal timer the same as the flat timer so that's a great question the the original concept is that if you know that the there is a flood coming what that basically means let's say that it's there's a downpour or previously it was raining so there's a downpour and there's a flood coming the concept is if you're gonna buy beans above peg because it's downpouring if you're going to buy beans above peg you're paying a premium for the beef and the only reason really to pay a premium for the beans other than there's some external arbitrage that beanstalk doesn't care about from beanstalk's perspective the only reason to buy beans above peg is to participate in the bean senior edge the yield that's coming between now and the flood after the flood who knows what the yield is so the the the reason the inorganic demand would be from buying buying above paying a premium depositing and then collecting senior rich and the thing is if the withdrawal freeze is less than the seasons before a flood then you can still buy pay a premium deposit collect some senior edge withdrawal unlock after the freeze sell your beans at the same premium and therefore you collected the senior ridge but didn't collect the loss on the change in the bean price and so the whole concept is what beanstalk does by rule is it makes it such that the only reason an efficient buyer would be buying beans above peg if it's raining is because they want to hold beans for a longer period of time and so you you can't always eliminate inorganic demand for the market like there's people that may still do it but if they do it they're going to lose a lot of money and that's what happened during the september uh pump and dump was there were a lot of participants that bought and deposited uh you know and then either withdrew immediately or withdrew after the season of money but in both cases didn't earn enough seniors to cover the change in the price of the beans thank you um for that answer i guess uh a a bit of new terminology has been used in here might get some time for people to get used to uh but as jww uh um wrote in the chat flood is the season of planning or what used to be in the season of plenty i guess it still is the season 20 until until the bfp passes okay uh continuing the discussion about the silo publius i was thinking what are your thoughts about removing beans completely from the silos so only only liquidity pools are to be you know white listed into the silo and and the thinking is the following um for you to enter the silo you have to be in an lp pair and then let's say you know the price of bean is is below one people are converting this is when you're allowed to to convert into beans but then when the price of beans go above one the protocol automatically you know converts anything that's anything that's beans into into lp again so ideally speaking uh you'd only want to have you know lp pairs in the silo and not beans what what do you think about that so you're saying sort of like a forced maximum like the system stays at the maximum lp yes so there's a couple things one you we in general have always felt that you want to avoid the protocol making any decisions at the economics at the market level or doing any open market operations obviously the flood is the one exception but as we were just talking about with uh to answer austin's question the flood only happens in certain situations and the economics that are created by the flood are you know such that it it creates a behavior where the efficient thing to do is not participate if that makes sense so the goal the goal with convert is to effectively facilitate efficient price discovery of b and if one of the things that was very evident uh in the in the early days when there wasn't converts i guess before december was that when the price was too high the people that were uh the people that were holding deposited beans they were getting more deposited beans and wanted to sell their exposure to deposited beans but couldn't and it's very natural to then say well why not just do it automatically at the protocol level well the reality is that if you do that you lose the price discovery so if somebody knows that they can always buy beans at a dollar because there's going to be this infinite convert of deposited beans at exactly a dollar that basically caps the risk in a lot of different capacities of how you're measuring risk of the bean price jumping too high so if we if we think about efficient price discovery for the bean price on both the upside and the downside having this artificial price cap for a significant amount of supply that can be very easily projected out like oh there's 60 million beans that are just waiting to be converted at exactly a dollar therefore the price can't go above a dollar that makes it really easy to short beans as an example so you can't have at the protocol level if you want efficient price discovery from the market you can't have beanstalk doing this type of behavior now separately it may be desirable for certain certain individual farmers to say at you know at exactly a dollar i want to convert back to lp that's fine but that's something that should happen on top of beanstalk again as like a a protocol that makes using beanstalk easier or interfacing with it easier and simpler or more autonomous for the farmer but not at the beanstalk protocol level bean stock that's a protocol doesn't want to dictate what the price of a bean should be in any capacity including that the price is too too too too high and saying it should be lower and work the protocol is going to just immediately return the price to a dollar it really only does that during a flood and uh the case for that is i think that already laid out that's a pretty good answer i guess um having beans in circulation uh comes into the equation so you can't you can't like know exactly what's going to happen given that there might be beans that are outside the silo but i agree with you that knowing what's inside the silo already gives you um an idea or understanding as you said that there's like 30 million beings deposited then you know that there is this much that's that's there and and that is a valid point um okay i wanted to move a bit to governance uh i'm following uh up to you know the latest uh the beanpod episode uh with with uh john where they discussed um zero knowledge proofs and in part of it they um discussed uh how zika proofs could be used um in governance for voting basically uh and the idea is for it to have what you know uh in in a normal world we call a secret ballot uh where you vote but no one knows you know who voted what or what what the vote is and what we what we have today uh uh with governance is that everyone can know what what people have voted and things like that might intimidate people to vote in a certain way or not vote at all and then lastly which was something that we've experienced is that you can see what the vote is and then decide you know to to try to sway the vote uh uh in the last in the last hour what do you think about um zk uh voting i guess or governors uh through zk approves and do you think this is something that being stopped might want to implement in the future well i think the question that you're asking is a very philosophical one about whether more information is always better to create a more efficient market and that applies not just to governance but it also applies to price discovery for beanstalk and beanstalk related assets so frankly and a great example of that would be let's say you're taking out a derivative on top of beans you've got some price that your cdp is going to get margin right should that for that price be uh which currently if we looked at what's been if if you look at kind of what's been happening over the past month or two on chain a lot of those cdps the bigger cdps have been getting hunted because the price at which they're going to get margined uh is very clear so on the one hand you could make the argument that it's a very efficient market to have all of those prices be totally transparent and everyone know what the margin price is for every position uh in the market for example but on the other hand maybe it's actually a more efficient market if nobody knows anyone's merchant price and people are actually just taking uh directional bets now i think i think there's probably a good argument in both directions uh just kind of thinking out loud uh the role of arbitragers that are uh taking advantage of some of these uh i don't know if you'd even call them arbitrage i guess whether you'd call them arbitrage is really the that might be you know like a de facto answer if you consider them arbitrages then they're making it a more efficient market if they're not doing arbitrage then it's you know not really helping the efficiency of the market they're just making money so i don't it's it's particularly hard to know particularly given such a speculative space that we're in right now where there's so little real economic activity so to some extent like the demand for the a lot of these assets even bitcoin ethereum and beans for the time being until there's real economic activity is largely derived from speculation and therefore knowing what at what prices people are speculating at that's probably helpful towards minimizing the market just getting totally out of whack and crazily speculative like it's helpful to have that knowledge be transparent uh but at the same time you know i don't think it's reasonable to expect if zero knowledge proofs are available that market participants won't elect to to use them right like it's ah if you're trading and you're taking out a cdp or you're you're you're using a cdp to take out some sort of position that position you're gonna you're gonna want that you're gonna wanna use the zero knowledge technology it's very clearly beneficial to the user so it seems like we're going in that direction anyways economically and then to answer your your point more directly mont about governance i think that voting uh you know in a democracy it's very clear that who votes on what uh being being anonymous at the ballot is helpful but when we have elected officials uh we we don't really like there to be anonymous voting in congress for example so it's it's there there isn't a one-size-fits-all answer to this and perhaps it is that wallets voting individually on things are anonymous but if there's a delegation uh you know as of now beanstalk doesn't have any delegation of stock for voting but if if that were to exist in the future not to say that that it should but if it were perhaps anyone that has delegated stock if if you've delegated to someone you get to know what they voted for something like that so what's an appropriate amount of information to disclose from from a an implementation perspective for various things is sort of up in the air but we would tend to we would tend to assume that the the market is going to drive things towards a a zero knowledge environment sooner rather than later assuming the tech exists so it's a balance between uh privacy and accountability when it's governed governance wise austin asks um and this is this is a a thought experiment i guess that that you've brought up earlier in an earlier class and that is what happens when beanstalk grows and let's say becomes you know the dominant um um currency uh and it outgrows um ethereum where we're right now in a you know in a time where ethereum derives its value from uh from beings um how how do you think that this can be and then you'll have this reflexive you know um um scenario that that can happen uh in uh when when what if that happens let's see um so austin asks how how can this be mitigated i i know that you said that you were thinking about this i don't know if you you know continue thinking about it or if you even have an answer to that but here's the question so i hate to play coy but i i you know i think we're i think i've got a decent answer but i'm not ready to talk about it yet because it could be really stupid so uh you know maybe maybe next week but probably not next week either but we're we're working on it that's that's fine i i can maybe uh continue the the the question or the thought experiment a bit and and it's okay if the answer continues later do you think when when that happens for being to outgrow let's say the the holsters and is that possible with bean stock only being on ethereum or will it you know by default bean beans and beanstalk would have to be you know cross chain or used elsewhere for it to actually outgrow ethereum itself can the how can can the host outgrow the um you know the environment that is n or only once it's actually you know in multiple places and it's okay for later i think i think this question is it you know when you when you try to think about and really get to the bottom of what like bitcoin maxis say about ethereum it's that the the main reason for using bitcoin or holding bitcoin uh is purely its endogenous utility as money and ethereum the thesis behind building ethereum was that it's going to be the same thing but allow for computation to happen on top of it and because you have computation on top of it that the value of aetherium is inherently exogenous right so it required people aren't holding ethereum because it's money even though at this point in time people very well may but i'm just saying what the criticism is people are holding it because of the expectation of future use of compute power and then you can get into well what's the compute power work that's a separate question now at the end of the day there's a good argument to be made that beanstalk at scale isn't exiled in a source of demand for ethereum because ethereum is going to be in the silo to a large extent in a bean ethel p token or in stock youth lp tokens or who knows what else because ethereum is the most decentralized acid on the ethereum network or ether i should say is the most uh decentralized acid on the ethereum network and it's very attractive to trade against save for its volatility now let to talk about just mitigating that risk at a surface level you do you you you can have other assets other than ethereum trading against beans right um usdc and the like but at the end of the day the whole network the whole security of the network is secured by ethereum and so you can't really have that much exogenous value existing on the ethereum network if it's all secured by the market cap of ethereum and market cap isn't the best metric but the point is there's a limit to the amount of value that can exist on ethereum uh exogenous to ethereum and that's really a catch-22 that creates a problem if the value proposition of ethereum is well there's going to be exogenous demand for ethereum to use it but if beanstalk is the main use case and its limitation is that there's not enough exogenous value on aetherium you can see how this becomes a problem for ethereum so frankly not not sure that the the answer here is what what people may think but i think it's it's it's more likely that beanstalk just needs to continue on the path of establishing endogenous value of its own so as cool as all of the other stuff like what mr manifold is talking about with root and what could exist on top of root and on top of beanstalk in various capacities as cool as that is it's very important that beanstalk establish itself as an issuer of money with endogenous value and the strength of its credit history is really the core to that and so to get here to answer your question about well what does the future of beanstalk look like and how is this risk mitigated frankly it's hard to imagine the risk being mitigated by moving to other chains that are either less decentralized or may have higher market caps but other security risks and then there's obviously cross chain uh issues and what it like what does all of that look like i mean i think at a high level it's more likely that at some point beanstalk becomes like a network of its own with its own validator set now that may be very distant in the future and that may be a wrong history may prove that to be a wrong take but when we analyze from a macro perspective the the situation at large i think there is an ethereum native solution which again just at the risk of sounding like a total buffoon not quite ready to disclose it yet but uh i think that there is a way to grow very healthily on ethereum for a significant period of time but when we talk about and i mean excuse me the other issue is if your network security is is coming from the demand for some protocol a la what we saw with luna right when you have a decrease in demand for beans in this case if the security of the ethereum network is dependent on there being demand for eth from beanstalk that can cause there to be danger to ethereum and again we go back to well the demand for ethers coming from exogenous value maybe maybe there's still enough demand and it's decentralized enough such that there's no takeover of the ethereum network but maybe not it depends on what scale this is and how large beanstalk is a part of the ecosystem the same exact problem applies if beanstalk has its own validator set now like what is the the value that validators are you know or earning for continuing to validate through a down period maybe you know some iteration of the stock system can be used on that front i haven't given this too much thought frankly because i think it's very far down the line and a great problem to have if we ever get there but um having you know just thinking out loud a little bit do you think um having something like that um which which sounds a bit like you know um a stable bitcoin let's say um given that it will have its own validators can that be kind of you know um like like having fees then or you know having some sort of like a negative interest rate if you want to call it um where you know those validators are being paid for the service or is it exactly the same and that's how i see it it's just another you know senior edge but people are getting paid for it because you know those who are uh maintaining peg in the silo are you know uh doing doing that validation or that utility in itself yeah i mean the the simplest you know the simplest iteration is probably that the silo becomes the the staking side deposited assets become the staked assets to some extent and therefore not much changes from an economics perspective but to be honest really haven't thought through this one uh particularly so take all of this with a grain of salt that's fair i think you know we probably have a lot a lot to think about um before before we come to that but interesting questions nevertheless uh sync asks and we're back to zk proofs um do you think this can be something that we use for the pod marketplace for example i guess this question can be applied to the whole of beanstalk you know and we're not talking about governance now and you've alluded to you believing that this is anyways where you know the whole you know economy or the blockchain in general is going towards so users of beanstalk will you know have privacy through zika rollups um do you see that happening yeah i i think over time it's it's hard to know at the pace that everything will develop at but hard to imagine that won't be the case at some point all right we we're already um eight minutes um on on the hour and i think we're at the end of the question so unless we have any other questions we can conclude class thank you everyone thank you publius always and see you next class next week thanks guys take care