Saddle x Sperax Growth Partnership AMA

TL; DR On Friday January 28, 2022, Saddle's Zim Hang was featured on Sperax's Discord for an AMA. Saddle and Spearx recently formed a partnership where Sperax propsed a new metapool on Arbitrum that included $USDs.

Transcription

Frida | Sperax
My name is Frida. Thank you all for joining the AMA. today. I'm the co-founder and partner at Sperax  and Sperax is a DeFi ecosystem that builds a suite of different products that mostly centered around our hybrid, decentralized stablecoins that is crypto, collateralized, and algorithmic stablecoins that we can dive into the mechanism later if you guys are interested. Besides that, we are building out a decentralized product by lending and borrowing protocol.

In our technical roadmap, which will be rolled out early next week, we're going to open our roadmap for more on a more technical side, like the staking governance, DAO, and all that good stuff. So please stay tuned to our community and our social media for the official announcements, very exciting stuff. However, today's theme is to talk about our growth partnership with Saddle finance, which I'm very, very excited about what Zim Hang on the call today. And before we get started Zim, would you like to do a quick rundown about who you are? And what Saddle Finance is about? And what is your favorite ice cream flavor that is required for all of our guests?

Zim | Saddle
Oh, man, all right, well, I'm gonna say the ice cream flavor for last. Because you know, when you think about that, so as Frida mentioned I'm Zim, CMO/COO of Saddle Finance, we are a stable swap on now Ethereum, Optimism Arbitrum,  and Fantom as well. So any pegged assets we have pools for and our goal is within the app, you know, to reduce slippage, and larger in the DeFi ecosystem. We hope to bring the stable, swap primitive to all the chains and DeFi so you can learn more about us at saddle.finance, you can check out our docs and if anyone's interested in working together. Like we very much pride ourselves on collaboration and being open source.

And I'm sure everybody here is familiar with Curve. That might be a question just anticipating that we differentiate ourselves from Curve by one being built on solidity and being open source so that anybody can fork the code and bring the stable swap primitive to whatever ecosystem they wish. And yeah, big thanks to the Sperax team for inviting me for this AMA. It's super awesome to be working with you all and it was great running into Alec at the DeFiCon event. So that was really fun to just accidentally meet in person. And I'm going to go with four favorite ice cream flavor. Cookies and cream.

Frida | Sperax
Nice way. How do you guys meet again? defiant meetup?

Zim | Saddle
There was a DeFiCon in New York. They host an event at the Defi. Oh, I see. Alec and yeah, it's super random. I was on the panel there about crossing a multi-chain feature. And yeah, he came up afterward, just like hey, we're actually in a telegram group.

Frida | Sperax
Nice. Nice. It was this month or last month? I missed it. I think it was earlier this month. Okay. It was in Brooklyn, right? Yes. Okay. You're also based in New York. Is that correct? That's correct. Okay, Saddle offices in New York?

Zim | Saddle
We're actually remote first, I would say maybe the majority of team is in San Francisco or New York. And then we've got a couple of other folks from all over. I see Rachel's in the audience, she's from Wyoming. We've got friends in Italy and India. Definitely remote first.

Frida | Sperax
I see. I see. Okay. Yeah. So just in case the audience does not know that new New York is our head office for Sperax and feel free to hang out with her in town, just shoot us a message. We'll be more than happy to have a drink together with you. Yeah, that is the intro cipher seller finance. I think let's get straight into the proposal side, Alec, would you like to do a quick rundown about what the proposal is about and let the audience know who you are?

Alec | Sperax
Yeah, for sure. So I'm Alec. I'm the Business Development Lead here at Sperax. And as you know, I focus on like, making USBs usable and driving demand for the product by building use cases and expanding liquidity so we can basically make this an extremely accessible product for this new generation of user that's not going to be crypto native or be a crypto expert. We figured, you know, step number one is ensure there's adequate liquidity of the stable coin.

So that was the primary motivation of, you know, reaching out to Zim and the the team over at Saddle, we had identified that, you know, we need to create incentives for our users to mint stablecoin. And then we narrow down a profile of partner, which is a stable coin swap. And we started researching teams researching what's out there. And basically, the ethos that we we observed and that we, you know, learned after speaking with the saddle team was very appealing to us.

And it really aligned with our vision for a cross chain permissionless DeFi experience. So it motivated us to, you know, propose to their team that we can actually do a incentivize metapool. So what the proposal specifically is, is a ask from the $SDL community to approve an $SDL spend, and the Sperax team will provide $SPA as an additional incentive. So any user that deposits the stable coins into the USDs metapool on Saddle, they will earn SDL, and SPA rewards.

So after that, it just makes USDs more liquid, it increases the circulating supply, it allows Sperax to build cool products on top of it. And it just makes the general usability of the Arbitrum ecosystem that much better. Because at the foundation, there's a additional liquid asset that can be used as a money Lego to build a whole suite of exciting products in the Arbitrum ecosystem. So yeah, that's that's the proposal, dual liquidity incentives for stable coin pools over on saddle.

Zim | Saddle
Yeah, I just want to give a shout out to Alec and the Sperax seen for just being super easy to work with. And, you know, we got this proposal out pretty quick. And if you guys check, the forum, you can see like, you know, out of 42 votes, and I think 41 votes will probably for. So it's very exciting proposal, and I know the saddle communities quite pumped about this.

Alec | Sperax
Yeah, beautiful and Zim. I don't I don't know if this is like a community question. But I think it would be helpful maybe would you be able to give like a 30sec overview of the governance process and kind of like how that works from, you know, the the discord to the discourse to the snapshot?

Zim | Saddle
Yeah, so initially, what we recommend is, for any projects, or persons who want to create a proposal, talk us out, I was, you know, just jumping out of discourse into the governance section, you know, well introduce yourself and say kind of what your share a bit about your idea. And just, you know, get gather some feedback, see, test the waters a bit. And if, you know, the community reacts positively, then we go to the forum, which is discourse Saddle. So the URL saddle.community , and it's built on discourse. And on there, it's, we do polling. So if you, I think the, the spirit, the Sperax proposal is a good example.

It has a summary and background, the motivation and the specifications, and then a poll just to get kind of, you know, a softball for support. And then once that is looking good, so typically, we leave about the days for that, then we'll move to snapshot. So we have an SIP editor, for saddle improvement protocols that will go and move it onto snapshot in which it will be all saddle holders will be able to $SDL holders will be to vote and voting strategies, includes unvested $SDL as well. And then once that goes through the multisig, were executed. So that's the governance process in the current form. We're moving into on chain governance, probably gov bravo in the coming months, so then everything will be done on chain.

Frida | Sperax
I see. Thank you.  Do you have any follow up questions regarding CMC answer about the governance process? No. Got it. Okay. We can go deeper into the proposal then. I wonder what is I wonder if I think Zim has not covered about this part. But what is the relation shared between a primary pool and a meta pool?

Zim | Saddle
Right. So the primary pool or the base pool consists of a number of pegged assets So in this case, I think, the USDs metapool, we build on top of our stablecoin, base pool, which has USDC, USDT, DAI, and the synthetics USD, the syn USD. And so in this case, the base pool is typically one to one ratio of all of the constituent assets. And then a metapool builds on top of a, a base pool, and it is 50%, the base pool, LP tokens and then 50%, the metapool or I guess, the new asset, which in this case would be USDs. So in the metapool, you have basepool LP tokens, and then USDs in this case. And so the purpose of metapool is to allow LPs to get exposure to whatever the new asset is, while also, while building on top of the liquidity of the basepools.

Frida | Sperax
Got it? Okay. Um, can you explain that from a user perspective? Maybe you could pick up because it's questions from the community. I guess what I'm trying to ask is like how exactly that will inform users experience, metapool and primary pool.

Zim | Saddle
Yeah, so it's pretty straightforward. In both cases, you can deposit directly. So in the case of the base pool, you can deposit you know, one of the assets or all four of the assets in a balanced manner. So if you deposit unbalanced in a basepool, what happens is you effectively do a swap against the pool first. So if you actually deposit the lowest weighted asset in the pool, you get a bit of a bonus, because you're essentially arbitraging the pool, right?

And then deposit into meta pool, you can do the same thing, you can actually just deposit any number of the assets or if you already have, deposit it into the basepool, then you deposit your LP tokens with and or the, the new asset. So basically, to summarize, there's two options for the metapools, you either deposit, you know any of the base pool assets plus and or USDs, and then depending on what you deposit, if it's unbalanced, then you're doing a swap against the metapool, and then it'll just balance out your, your token.

So effectively, you would have, you end up with your position when what you would end up with 50% basepool LP tokens and 50% USDS. And then the other option is, you already have deposit into the base pool. So you already have this LP token, so you just deposit that with or without USDs and then same thing would happen, it would trade against the pool, and then it would be balanced. So you end up holding 50% basepool tokens and 50% USDS.

Frida | Sperax
Okay, thank you. That's very thorough. Another question from the community will be they're pretty interested on the background of saddle. So we're curious how big is the saddle team?

Zim | Saddle
Yeah, we're growing rapidly. We're about 10 people now plus, a few contractors and saddle was founded, I think, Septemberish of 2020. Yeah. And then we launched the app, January 2021. So we've been live for about a full year. And since then, we've added, you know, a bunch of features, I can link, kind of a roadmap or blog update posts, or any of you can just go to blog.saddle.finance, and I think one of the pinned posts will kind of show you the things we've built on the way.

Yeah, and again, we're built on. I think, originally, we had wanted to build virtual swap as kind of the key differentiating feature. So relying on synthetic syns to facilitate like, very, very large trades, like over, you know, $5million in value, using syns as a mediator. So we have launched that feature, but I think now we've transitioned into really helping the DeFi ecosystem obtain this stable swap primitive on all on the various chains, side chains and L2s. We launched our token, I think November of last year. So it is currently non-transferable.

And most of these tokens are vesting. So vesting over two to three years. And we're in the process of really building out the community and like building, you know, more partnerships. And I think, within the next like month to 10 months or so governance can potentially vote to unlock the token, in which case, it will be tradable. And there'll be a market for it. So we're very much in like the turn saddle into a DAO phase and like build up the community and really support the overall growth

Frida | Sperax
Yeah, I think Sperax has found a way as well. It's all about decentralization, building your own little Craig, your own little, your own little world, your own little ecosystem. So pretty excited for you about that. Next question from the community Saddle is live on Ethereum layer 1, Optimism, Arbitrum, and Fantom why these chains first and do have plans for future chains? Could you please walk us through your decision-making process when considering other chains?

Zim | Saddle
Yeah, I think the first thing we look at is probably how the TVL or like how adopted the particular side chain, or L2 is. So for example, in the case of Fantom, for folks who've been following the v3NFT drop, that was something that we were able to get on, that AirDrop for by moving and deploying on Fantom, and then bootstrapping some liquidity on there. And, you know, I think that, like, Fantom is a great example of like, just seeing a lot of growth and projects deploying, and specifically for us, like for partners, like Sperax for other algo stables like FRAX, or, you know, just like them having the volume on a particular chain is like a good signal for us that like, hey, there's a lot of growth in you know, Sperax on Arbitrum, like, I think, you know, if we want to arbitrary like, that could be a great signal for us to like, move on to this particular chain and provide the service of low slow, low slippage swaps. And in terms of next chains, I think we have Moon River/Moonbeam, and BSC lined up.

And furthermore, we have a program SEMPI that's will hopefully be announced in the coming days. And for that, in particular, you know, it's there's just a lot of really great projects and teams on so many different chains. And it's kind of not feasible for any individual team to like, go out and deploy the app internally. So we have a program that will reward and incentivize and support teams that want to build and will fork code, for example, and build on other chains.

And so, you know, we have a couple of teams that are doing this on Polygon, and on Avalanche and on Harmony, and we're looking for more teams. And we'll be supporting more teams on you know, like Evmos, Telos. So, you know, plenty more, plenty more chains. It's, it's endless, for better for worse, so there's no for everybody. So as we need, you know, everyone's help.

Frida | Sperax
Mm hmm. Sounds good. Um, last question from the committee for Saddle finance. How does launching meta pools help grow SDL ecosystem and price?

Zim | Saddle
So, I think the main metric is like TVL right? So anything that any project or team or protocol does increase their TVL will increase

So yeah, so growing TVL is like probably the most straightforward way of increasing protocols value. But I think for us, you know, like, we benchmark on how successfully we're able to support other projects and other teams. So just having like more diversified tokens, you know, like USDs, and just being able to kind of provide the support that way. And the device is fine. TVL is also like, a great way for us to be able to say to our token holders that like, hey, look like we're doing a good job with our mission to kind of like provide the service across the ecosystem.

Frida | Sperax
I see. Thank you for that. Um, cool. I think the next section of questions is for Alec from the community. Um, I think a lot of people has been wondering what has the benefits of partnering with saddle, I think that's a really crucial one, the most foremost one community concern.

Alec | Sperax
Yeah, for sure. Well, there are many reasons. But first, kind of let me start by explaining where we are in like a development standpoint and why we were range bound. Hmm. So our mission right now is basically to raise toward 100 million circulating supply of USDs and make that circulating supply extremely accessible. So we're really in this like infrastructure phase, you know, just basically building out our presence, making our presence super usable on Arbitrum. That comes with three primary objectives. So one is increased general, liquidity, two is increased general accessibility, and three, maintain peg stability.

While we do all of that, so on the peg stability front, you know, an AMM range bound peg partner, it makes a lot of sense, because it adds more ability for arbitrage to swap. So without getting too technical, what that means is, with a small peg deviation, arbitrage traders are presented with a more profitable trade to bring the stable coin back to its peg. So very simply, if we incentivize this partnership, USDs will be more stable than before. On the accessibility front, you know, we have partnerships with Fiat on ramping companies, which we'll be announcing very soon to handle the accessibility. So you know, once it's stable, once it's accessible, we need to ensure that there is enough USDs to satisfy demand. So this is an exciting part where the partnership comes in, and the primary motivation behind us allocating 20 million SBA to the partnership, we basically we we need to incentivize people to mint USDs.

So a partnership with Saddle, you know, makes a lot of sense. Because once we can allocate these rewards and contingent on the community vote from saddle, they'll earn, they will being the stable coin mentor and stable coin liquidity provider, they'll earn rewards in SBA and SDL. So now, with not subjecting themselves to any sort of impermanent loss risk, or really any sort of market risk, they'll be earning trading fees, there'll be earning incentives and SPA.

And they'll be earning incentives and SDL. So now, we have committed liquidity partners that provide a necessary service for us in the short, short term, but now also their long term holders and governors, both protocols. So we will be diversifying our governance presence, we'll be adding liquidity for the stable coin and ultimately, racing toward our goal of being the most liquid most accessible and most stable, stable coin for arbitrage.

Zim | Saddle
Yeah, I just want to click addition to what Alec said, I think just diversifying the, like having incentives from both sides and getting this like cross-pollination, I think is super crucial for the growth of a protocol. And like for me personally, like I didn't know much about Sperax until very recently, and and now I'm like probably gonna buy a bunch of SPA and hold it and stake it whenever that becomes possible. Because like, I think it's a dope project. And yeah, and that's like what you know, what DeFi is all about.

Frida | Sperax
Next question. Why does launching a USDs metapool help grow the Sperax ecosystem? I think we cover part part of that but cold you please elaborate a little bit more?

Alec | Sperax
Yeah, to a default, it makes the ecosystem more enjoyable because the peg is tighter, users don't have to worry about, you know, the peg stability. And then 2, it just creates a very poor incentive for people to mint the stablecoin. And if you think through the user story, or the user perspective of someone who's going to mint, the stable coin, provide the liquidity on saddle, once you're done providing liquidity, say, after the six month period when the rewards and you know, you're not going to go back to the Sperax protocol and redeem your stable coin for more for the underlying collateral, most likely, you're just going to swap it on set for whatever other token you want.

Or you're going to hang on to the token because you love the auto functionality. So all I'm driving toward is that once the user instead it's a lot easier just to swap out of it than it is to actually burn the thing. So it's going to make USDs far more liquid and far more stable.

Frida | Sperax
Got it? Thank you. That's very thorough. The last question from the committee for Alec um, I we covered why Saddle chose Arbitrum a lot of people have been asking why Sperax chose Arbitrum, could you please walk people through about our decision process?

Alec | Sperax
Yeah. So this was, you know, just an objective decision based on kind of how we think about how we want to build out the infrastructure. So we're deeply passionate about existence, permissionless, infrastructure, all governed on chain. So in order to do that, we really need a centralized infrastructure that is resistant to censorship. And we, you know, with that basic notion in mind, we wanted to go, we wanted to stay within the Ethereum ecosystem, we, you know, it's the most linked chain, it's proven to be the most secure for the longest, holds the most value. So we really wanted to, you know, participate in that ecosystem, we thought it aligned with our personal ethos, and the ethos of the company. So the security of Ethereum, but then we need into some environment that are cheaper gas fees, because we are a stablecoin.

So in addition to trading, it's just a medium of exchange. So as you pay family members, as you pay friends, you can't be subjected to layer one gas fees. And on the cheaper gas fee front as well, thanks to the cheaper gas fees at the base layer. The peg can remain tighter. So as an arbitrage trader, is assessing an arbitrage trade to bring a stable coin back to its peg, you have to consider the protocol fee, but you also have to consider the gas fee. So if the gas fees really high, and arbitrage trader will just simply wait until there's a larger peg deviation before they execute the arbitrage. So this might sound nice for an arbitrage trader, because you know, they can make money.

But the experience for the end user is that now they have a stable coin that, you know, swings two or 3%, which we don't want. So cheap fees, but it still borrows the benefits of the security guarantees of Ethereum and then, after talking with the core team and understanding their vision for decentralizing the sequencer, it was an obvious choice for us, even without the incentives offered from other layer one chains. So they'll be in our cross chain vision. But when it comes to peg stability, and ultimately trust at the infrastructure level. Arbitrum was the clear choice

Frida | Sperax
Very nice. These are all the collective questions from the community. And we're opening the floor to the our members on call right now. Please drop all of your questions related to the partnership and am a question channels and we'll take them right now. I think people have started actually posing the questions about a partnership starting yesterday.

Saddle Finance: https://saddle.exchange/

Sperax: http://sperax.io/

Saddle Twitter: https://twitter.com/saddlefinance

Sperax Twitter: https://twitter.com/SperaxUSD

Saddle Discord: discord.gg/saddle

Sperax Discord:  https://discord.com/invite/sperax