[notes/8][m]: flurry of notes around ReFi stuff and bonding curves.

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notes/berenzon-2020-constant-function-market.md

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+# Notes on Constant Function Market Makers: DeFi’s “Zero to One” Innovation
+
+> ## Drawbacks of Constant Function Market Makers
+> 
+> ### **Slippage**
+> 
+> Slippage refers to the tendency of prices to move against a trader’s actions as the trader absorbs liquidity — the larger the trade, the greater the slippage. CFMMs incur large slippage costs and are thus better for smaller order sizes.
+> 
+> ### Exotic financial risk
+> 
+> Adding liquidity to a CFMM is simple but comes with some complex financial risks ([impermanent loss](https://medium.com/@pintail/uniswap-a-good-deal-for-liquidity-providers-104c0b6816f2), short volatility, long volatility/volume correlation, etc.).
+> 
+> For example, the Uniswap payoff curve is concave, meaning that liquidity providers are profitable within a certain price bound and will lose money in large price movements:
+>
+![](../assets/Pasted%20image%2020220620230247.png)
+
+> Ideally, we want “[convexity](https://en.wikipedia.org/wiki/Convex_function)” when taking risk, which means having upside on both sides of the risk spectrum. This payoff structure suggests that liquidity providers should be actively monitoring changes in the liquidity pool and acting on changes quickly to prevent significant losses.
+
+Ed: this is a crucial point. This setup is basically risk-on. As volatility increases in the market risk of loss goes up for liquidity providers => people remove funds from pool => reduced liquidity => more volatility. This could potentially be a vicious cycle.
+
+This whole section may point to reasons why traditional exchanges have never used AMMs. After all, it is not like AMMs are super sophisticated or complex - there is surely a reason why people haven't done this a lot before. And i suspect there are some very good ones!

notes/bitconnect.md

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+# Bitconnect
+
+[pyramid-scheme](../concepts/pyramid-scheme.md)
+
+
+https://www.justice.gov/opa/pr/bitconnect-founder-indicted-global-24-billion-cryptocurrency-scheme - Feb 25 2022
+
+> BitConnect Founder Indicted in Global $2.4 Billion Cryptocurrency Scheme
+>
+> A federal grand jury in San Diego returned an indictment today charging the founder of BitConnect with orchestrating a global Ponzi scheme. BitConnect is an alleged fraudulent cryptocurrency investment platform that reached a peak market capitalization of $3.4 billion.
+>
+> According to court documents, Satish Kumbhani, 36, of Hemal, India, the founder of BitConnect, misled investors about BitConnect’s “Lending Program.” Under this program, Kumbhani and his co-conspirators touted BitConnect’s purported proprietary technology, known as the “BitConnect Trading Bot” and “Volatility Software,” as being able to generate substantial profits and guaranteed returns by using investors’ money to trade on the volatility of cryptocurrency exchange markets. As alleged in the indictment, however, BitConnect operated as a Ponzi scheme by paying earlier BitConnect investors with money from later investors. In total, Kumbhani and his co-conspirators obtained approximately $2.4 billion from investors.

notes/bonding-curves.md

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+# Bonding Curves
+
+In essence a bonding curve is just an algorithm for issuing tokens (ie. equity) over time at a varying price. Usually price goes up (or, equivalently number of tokens issues for given bitcoin/ether etc goes down).
+
+# Notes
+
+## Bonding Curves In Depth: Intuition & Parametrization (Dec 13 2018)
+
+https://blog.relevant.community/bonding-curves-in-depth-intuition-parametrization-d3905a681e0a - 
+
+I love this quote early on:
+
+> Bonding curves are a great tool for designing incentive mechanisms. At its essence, a bonding curve is a way to incentivize early adopters — those buying in at the bottom of the curve. **Of course if there is no intrinsic value to the bonded token, the bonding curve may be a pyramid scheme and is more susceptible to manipulation.** [emphasis added]
+
+He continues
+
+> For a bonded token to have intrinsic value it should entitle the holder to some future cash flows. If that’s the case, we can easily compute the present value of the tokens as the sum of all future cash flows. Once we know how much a token is worth, it becomes harder to manipulate its price.
+>
+> For example, if you are purchasing tokens of a [continuous organization](https://hackernoon.com/introducing-continuous-organizations-22ad9d1f63b7) (sort of like buying equity in a traditional corporation), and the token entitles you to a portion of future cash flows of that organization, you’ll be able to estimate the token’s present value. If you are able to observe when the bonded token is overpriced, it will be harder for attackers to execute a pump and dump. If, on the other hand, we create a bonding curve and attach it to a meme without any promise of future cash flows, we’ll have a much harder time reasoning about the fair price of the bonded token. In this case the bonding curve is easier to manipulate and is much more like a gambling game.
+
+# TODO
+
+* [ ] Augmented bonded curves

notes/commonsstack.org.md

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+---
+url: commonsstack.org/
+image: /assets/Pasted%20image%2020220620155920.png
+twitter: https://twitter.com/CommonsStack
+---
+
+# The Commons Stack
+
+https://commonsstack.org/
+
+![](../assets/Pasted%20image%2020220620155920.png)
+
+# About The Commons Stack
+
+## Purpose
+
+From the front page we have mission and vision.
+
+### Mission 
+
+> We are building commons-based microeconomies to sustain public goods through incentive alignment, continuous funding and community governance. Our library of open-source, interoperable web3 components will put effective new tools in the hands of communities, enabling them to raise and allocate shared funds, make transparent decisions, and monitor their progress in supporting the Commons.
+
+
+## Vision
+
+> We want to create a world where public goods are valued fairly for the benefits they deliver. Our current economic system frequently exploits the environment, and undervalues open-source software, open research, and other altruistic efforts addressing the collective needs of our society. We aim to change this.
+
+
+### FAQs: What is the goal of the Commons Stack?
+
+https://faq.commonsstack.org
+
+First and foremost, the goal of the Commons Stack is to build the basic infrastructure to launch continuously funded Commons around an open source commons. This can be research focused such as Token Engineering or infrastructure focused such as building out ETH 2.0. You can find an overview of our phased iteration strategy [here](http://commonsstack.org/#ids).
+
+The ultimate goal of the Commons Stack is to provide digital infrastructure for scalable management of shared resources worldwide, to prioritize people and the planet by enabling [regenerative intentional ecosystems](https://medium.com/giveth/the-commons-stack-scaling-the-commons-to-re-prioritize-people-and-the-planet-fdc076aec4eb). The Commons Stack is not directly solving these problems - what we are doing is scaling human coordination around shared goals, so communities (from the local to the global) can come together to solve their own problems.  We are building the infrastructure to enable that collaboration. This is very long term though, with the current state of blockchain technology, it will most definitely be adopted first by open source dev communities to push forward on digital public infrastructure - a public good provided to the world.
+
+
+# How are they going to do that?
+
+From the front page:
+
+> Our Commons have 4 layers, and for each we are building a fully open-source, interoperable component.
+
+![](../assets/Pasted%20image%2020220620160932.png)
+
+Ed: the most crucial and challenging IME is the Funding part so worth focusing on that. TODO.
+
+Digging deeper from the link at the bottom of the page:
+
+https://medium.com/commonsstack/deep-dive-augmented-bonding-curves-b5ca4fad4436
+
+## Augmented Bonding Curves (ABC)
+
+https://commonsstack.org/abc
+
+* Almost nothing there (no substance)
+  * A hero section with hero text
+  * Brief intro to free-rider and again claim of solving it
+  * Then a simulation for their software for simulation of augmented bonding curve
+* But their (augmented) bonding curve *assume*s the very thing they need to explain: it assumes people contribute money i.e. keep buying the token along the bonding curve. The whole question with a public good is why people will contribute (sufficiently) if contribution is voluntary -- why wouldn't they free-ride?
+
+### About
+
+> The Augmented Bonding Curve (ABC) aligns the incentives of a community to support an underlying public good. It creates the seed funding that will be used to achieve the goal of the Commons, and acts as the interface between the internal economy of the Commons and the outside world.
+
+![](../assets/Pasted%20image%2020220620202331.png)
+
+### Why do we need it
+
+> ### Why
+> 
+> Funding for public goods today suffers from the [free-rider problem](https://en.wikipedia.org/wiki/Free-rider_problem). These public goods rely on donations or allocated tax revenue for support, which is rarely sustainable or sufficient for the value they produce. The ABC enables communities to create fully liquid micro-economies that provide alternative, incentive-aligned funding streams for important collective resources.
+
+### Commentary: Key issue is no justification for claim they have an alternative method for funding
+
+> Funding for public goods today suffers from the [free-rider problem](https://en.wikipedia.org/wiki/Free-rider_problem).
+
+Yes, and not just today: since the beginning of human culture.
+
+> These public goods rely on donations or allocated tax revenue for support, which is rarely sustainable or sufficient for the value they produce. 
+
+Yes. Though it is sometimes sustainable (the question of sufficiency is complex) - sufficient for what? Equal to the value they produce? Sufficient to have them created?).
+
+> The ABC enables communities to create fully liquid micro-economies that provide alternative, incentive-aligned funding streams for important collective resources.
+
+How on earth does it do this? What is the alternative funding stream?
+
+Roughly there have been two options:
+
+- Donations: voluntary and usually insufficient.
+- Compulsory contributions (e.g. taxes): non-voluntary though potentially consensual - you chose to join the group and got a say in setting the level. Hence, usually much higher.
+
+What new option are they providing?
+
+### 
+
+## Inbox
+
+* https://medium.com/giveth/the-commons-stack-scaling-the-commons-to-re-prioritize-people-and-the-planet-fdc076aec4eb

notes/emmett-slater-2022-bonding-curves-commons.md

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+# From Bonding Curves to Commons Market Makers
+
+* PAMMS = primary automated market makers aka [bonding-curves](bonding-curves.md) aka issuing your own shares on a predetermined algorithmic basis
+
+
+### PAMMs only work if people buy so why would people buy in "commons" projects? (Ans: Not really clear)
+
+> Millennials are maturing and their values are starting to influence finance, and they need a livable planet before they need ever-increasing financial returns. If they could park their savings directly in planting trees or cleaning up trash in order to see and measure ‘returns’ in ecosystem health, rather than speculating in blue-chip ‘business-as-usual’ stocks, they just might
+
+Full quote
+
+> **Matslats:** The basic idea is pretty simple — I’m trying to think of the nearest real-world examples of organisations using the fact that they issue an asset to control the market in it.
+> 
+> I’m reminded of how sometimes countries will use reserves of their own currency and of harder currencies to manipulate the rate of their own currency on global markets. Similarly these last years we’ve been hearing about cash rich companies buying back their own shares because pumping the price this way is the best use of excess cash. And conversely companies issue new shares all the time as bonuses to staff.
+> 
+> **Jeff:** Right — there are many parallels to how these kinds of ‘economic leverage’ can occur, but the difference is that now blockchains enable purpose-driven communities to do this algorithmically, transparently and equitably, with any fungible blockchain asset.
+> 
+> And it goes way beyond equity and corporate shares. These tools could support new revenue and business models for emergent open source projects, nonprofits, and other public goods producing endeavours. Millennials are maturing and their values are starting to influence finance, and they need a livable planet before they need ever-increasing financial returns. If they could park their savings directly in planting trees or cleaning up trash in order to see and measure ‘returns’ in ecosystem health, rather than speculating in blue-chip ‘business-as-usual’ stocks, they just might! As a society facing the existential crisis of climate change, we need to be able to put our money where our mouths are — and fast. I believe these tools could help us do just that.
+
+### Matslats asks (sensibly) why would people basically donate money? And if they don't, aren't theyse just impact investments ... 
+
+> **Matslats**: I think few people, even in blockchain, understand the degree to which we must reimagine wealth and finance — even money must be redefined in order for society to respond to climate change and mass extinction in a way that minimizes suffering and death. At a time when humanity should be ‘all hands on deck’ most of us are either working bullshit jobs to make the rich richer, or are unemployed because money is continuously syphoned out of the real economy. When you talk about Millennials ‘investing’ in planting trees and cleaning up trash, and seeking non-financial, ecological returns; that’s radical, but I find it hard to grasp.
+> 
+> What I can imagine is nonprofit organisations doing the equivalent of issuing bonds in a less onerous and more experimental way than is possible for them in mainstream finance. I could imagine buying MyNGO tokens, and the NGO investing the money to generate a return which goes, some to me, and some to their own activities. Then when I need the money out, I could hopefully sell the tokens at face value.
+
+Ed: but wait a moment isn't this just impact investing. All you have as a differnce is the lack of regulation (the "less onerous and more experimental way") but that's a very dubious benefit -- and one that is not likely sustainable.
+
+## Introducing the Commons Market Maker
+
+### Commons Market Maker
+
+> That brings us to the last concept I want to introduce, as a particular type of PAMM that is geared towards continuous funding for public goods — sorry but it’s yet another acronym. Projects like the Commons Stack are setting up PAMMs with an additional spending account which they call the ‘Common Pool’ (because it’s a Common Pool Resource that is collectively allocated towards community goals). This configuration is being called a **Commons Market Maker (CMM).** According to David Bollier, a “commons” is the combination of three things: a community, its shared resources, and the rules by which those resources can be used.
+>
+> The CMM can be considered a new tool which accumulates and manages the hard asset (money) in the Common Pool. It also defines the community (which is the token holders) that can access the money and defines the rules about how the money can be spent (via [continuous voting](https://medium.com/giveth/conviction-voting-a-novel-continuous-decision-making-alternative-to-governance-aa746cfb9475) enabled by smart contract logic).
+>
+![](https://miro.medium.com/max/1400/1*cxIlu0ENo0JDOt6j0A2Hiw.gif)
+>
+> So how would this work in practice? A community of individuals come together and decide to mutually invest in their commons. They place their money into a pool and a Commons Market Maker issues them tokens. The CMM then allocates a certain proportion of those funds into a reserve fund (essentially a fractional reserve system), with the remainder of those funds being used to initialize the Common Pool for discretionary spending by the community. The tokens that commoners now hold are used for voting over how the Common Pool funds are spent.
+>
+> The CMM continuously funds the Common Pool by imposing entry fees for issuing tokens and/or exit fees for redeeming tokens. This has the added benefit of deterring speculators with extra transaction fees, and ensures that the community benefits from any speculation that does happen. 
+
+There is the crucial line:
+
+> A community of individuals come together and decide to mutually invest in their commons
+
+But what about free-riding? And if free-riding isn't a problem why do need the blockchain and a dozen acronyms? What inefficiency is the blockchain solving exactly?
+
+And then there is the secondary claim:
+
+> The CMM continuously funds the Common Pool by imposing entry fees for issuing tokens and/or exit fees for redeeming tokens. 
+
+Which again seems very dubious: transaction fees seem far too little to fund the commons. The main money has to come from actual token purchase.
+
+
+### These tools are truly verging on new ways of collectively putting our money where our values are
+
+> Jeff: Although it could look like a fad due to the hype cycles around crypto, I think these tools are truly verging on new ways of collectively putting our money where our values are.
+
+How? How does it enable this in ways that say market democracy does not? Why cannot I today allocate money to my values? or have the state do so via democratic voting?
+
+He continues:
+
+> t’s also doing that alongside new granularity and subsidiarity in decision making, and I think that’s fundamentally important. In a future world your regular choice of investments could include a <climateDAO> that funded emergent climate solutions, or <hungerDAO> that fed the hungry, or even <neighbourDAO> that supported your community. If you are bullish on Tesla stocks, wait ’til you see the latent demand for investments that directly support emergent regenerative practices on a global scale! (Of course, we are a ways off from that yet.)
+
+But again we have had participatory voting etc for a long time. There are fundamental reasons of scale why we don't do participatory budgeting at scale or why liquid democracy has generally been an abject failure.
+
+### We don't need to question that investment capital will flow into these tools
+
+Really?
+
+> With trends suggesting further growth of these kinds of digital cooperative organizations, I don’t think we need to question whether there will be more investment capital flowing through these tools.
+
+And then there's a slight bizarre "heads we win, tails you lose" point:
+
+> The true test will be in whether the early organizations who use them can successfully work through their challenges to deliver #RealValue. If so, more experiments will come. If not, more will probably come anyway — we are likely to see a lot of failures along the path of progress too, and that shouldn’t stop us from continuing to iterate these tools until they’re useful.
+
+## Closing out
+
+### Matthew Slater remains pretty sceptical
+
+> **Matthew Slater:** I started this process trying to unpack a lot of your language and translated it into universal financial concepts and I think we’ve made some progress with this. **I still have many concerns that new and repurposed language is being used to cover up for poorly designed financial mechanics and merely give the impression of innovation without real value underneath.** Given the growth of the crypto field in the last decade, it must be very tempting for people to overestimate their cleverness, and to mistake financial engineering for wealth creation. I certainly see potential in the new tools in giving power to nonprofits and reclaimed commons, but until the language and mechanisms are more comprehensible, I have trouble seeing this take off.

notes/ostrom-eight-principles-for-commons.md

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+# Elinor Ostrom's 8 Principles for Managing a Commons
+
+1. Define clear group boundaries.
+2. Match rules governing use of common goods to local needs and conditions.
+3. Ensure that those affected by the rules can participate in modifying the rules.
+4. Make sure the rule-making rights of community members are respected by outside authorities.
+5. Develop a system, carried out by community members, for monitoring members’ behavior.
+6. Use graduated sanctions for rule violators.
+7. Provide accessible, low-cost means for dispute resolution.
+8. Build responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system.

notes/powh.io.md

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+# POWH3D (Proof of Weak Hands)
+
+![](../assets/Pasted%20image%2020220620165241.png)
+
+> BECAUSE BAD IDEAS LIKE OURS ARE BUILT UPON THE CUMULATIVE FAILURES OF THE CRYPTO COMMUNITY
+
+![](../assets/Pasted%20image%2020220620165412.png)
+
+
+# Commentary
+
+Ed: you couldn't make this stuff up!
+
+# References
+
+- https://medium.com/block-16/powh-the-never-ending-pyramid-scheme-50b7b7743d9a

notes/regen.network.md

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+# Regen Network
+
+> Ecological assets for the ReFi economy
+>
+> Regen Network’s infrastructure originates digital carbon assets in the Interchain economy, unlocking web3 regenerative finance.
+
+![](../assets/Pasted%20image%2020220620161834.png)
+
+
+
+# Commentary
+
+A lot of amazing talk about climate crisis etc e.g. from the front page
+
+>  DeFi for Earth
+>
+> Infrastructure for the climate crisis
+
+Interesting to see the elision between creating a market and actually doing the thing the market supports and claiming those latter benefits e.g. "Regen Network incentivizes regenerative land use practices". Strictly it creates (maybe) a more efficient market in carbon credits and it is the people who *buy* those credits who actually incentivize those better land use practices. It was as if the NYSE or the Nasdaq claimed all the benefits created by companies who raised equity through their platform. Of course, markets are a key part of financial capitalism but they are a facilitation. It is also not really clear how Regen is uniquely or specially responsible for better carbon markets -- they already exist and large institutional players are there and/or would enter.
+
+All very similar to [klimadao.finance](klimadao.finance.md)  in the claims and arguments.
+
+
+![](../assets/Pasted%20image%2020220620162021.png)
+
+
+![](../assets/Pasted%20image%2020220620162349.png)
+
+
+I also suspect there is the classic elision between a database (easy) and reliable recording into that database (hard). This is the classic (fallacious) argument for DLTs and supply chain traceability. The problem with tracking carbon credits isn't about having a common central database (even if control is decentralized on the blockchain). Rather, it is the hard word of establishing and verifying what carbon actually was removed by whom, when.