Saddle x Diffusion AMA
18 min read

Saddle x Diffusion AMA

Saddle x Diffusion AMA

*This AMA has two recordings.

Diffusion pt 1

Low Poly Duck | Saddle  0:01
Okay, and here we are. I'm gonna go ahead and kick it off. That's Howdy, and Happy Tuesday to all the Degens and all the stable farmers alike. I'm Low Poly Duck, the ancient DeFi Boomer, also unabashedly ignorant of the NFT market. I got my start in crypto long long ago, in the days of yore, you might say. So, what I'm saying is I've lost more money than the average duck. Most ducks don't even use currency or the internet but luckily, Saddle was here with a nice cozy duck pond for me splashing. And I get to bring all sorts of fancy guests like you guys with me. One day, actually, I think we'll do these live from a pond in a boat or something, but probably not in a boat, probably just in our swim trunks.

Now we took a bit of a Twitter space breather last week excuse me, because we had Twitter spaces with Earnmos, 4T2 and Evmos the week prior. So they were just all sorts of opportunities for me to show off just how shut off Eth Maxis like myself can become from the contemporary chain agnostic user base. Today we're going to be having wait for it you guessed it that's another Twitter space about Evmos where I fumble around trying to come to terms with tendermint IBC and all this fancy Cosmos stuff. So today we're gonna be talking to Diffusion Finance, a constant product AMM on Evmos, and star of the recently passed SPIs 20 and 22. The proposals responsible for our token swap, and our exclusivity agreement, the pillars if you will, of our now official partnership, which we will be discussing here today in some detail.

Now please guys, remember that I am just a duck, okay? So if there ever comes a moment where you're thinking like wow, this guy's really getting it, just stop yourself right there and remember that for the most part, I'm going to be spending my days like most ducks, you know, eating floating around on muddy water getting chased around by kids with grapes, right. So it's hard for me to be anything more than Eth Maxi, okay? It's hard to find the time. I count on these Twitter Spaces to keep me keep me on my slippers as it were. And today's no exception. So to school me today, I'm joined with a joined by sorry Christian partnership lead at Saddle Finance. Christian, welcome.

Christian | Saddle  2:28

Low Poly Duck | Saddle  2:30
Excellent and Diffusion Finance our new partners, but also fancy penguin boys, fellow bird fans, Hello, and welcome.

Pixelman | Diffusion  2:39
Hey, there, thanks for having us. This is Pixelman from Diffusion, I go by Pixelman on Discord and but I also go by Pixel on telegram. So whatever is best for you.

Low Poly Duck | Saddle  2:52
Perfect, Pixel, the voice behind Diffusion. So I was wondering if we could get a little intro and background from each of you before we move on? Starting with you, Christian then moving on to Pixelman.

Christian | Saddle  3:05
Yeah, sure. So my background is originally I started my career studying in physics and philosophy, but I went on to start working in the defense industry, working as a data scientist. But actually I the crypto bug caught me real good and I started messing around in DeFi, became a real Degen around DeFi summer. And little by little I moved my way into the crypto space and now I work at Saddle.

And in Saddle I'm working on expanding partnerships, building out relationships with different protocols, make sure we both walk away happy and hope that both grow protocols grow as a result of the partnerships. So one of the partnerships I recently put together was with Diffusion Labs, which I'm very happy to talk about today and very excited to go into more depth with about.

Low Poly Duck | Saddle  3:57
Excellent. And Pixelmon, the voice behind Diffusion, from you please. Tell us a little bit about your background. How'd you get your start?

Pixelman | Diffusion  4:05
Yeah, so actually, we're still building pseudonymously. So I'm gonna sort of like talk. I'm here representing the team. So I'm gonna, I can talk a little bit about myself, but I rather speak more about the Diffusion team. I am one of the co-founders in Diffusion. I kind of like run marketing and product. And we're a team of small team actually, we're a team of eight right now and we come mostly from the Cosmos ecosystem.

I actually started in Ethereum DeFi. So we have a combination of people who have been a longtime in Cosmos and Ethereum a well, yes. Or DeFi Ethereum and the combination was great, but the whole project started out of the frustration that DeFi and Cosmos wasn't there yet and you know when Evmos launched and I'm-

Diffusion pt 2

Low Poly Duck | Saddle  0:00
Hey, while we're waiting for it to fill up for a minute or two, maybe you could explain the penguin to me. A little bit of a less pressing question. Since we've got the time now.

Pixelman | Diffusion  0:12
The Penguin talks. Well, actually, we just needed a mascot and we didn't know what to pick and just somebody, as we were discussing that on the chat, somebody just threw a penguin GIF. And somebody says, hey-. Oh, no, I remember. We wanted to make it, there's a story behind this, it's not come up. But the alpha is kind of like a when I connected to the Linux Penguin, if you're familiar with it. But it's more a mascot than anything else, so there's not much to explain really.

Low Poly Duck | Saddle  0:57
Yeah, so of course, I am familiar with the Linux penguin. And I'm also a fan of mascot and via emoji. The penguin was one that hadn't really been touched yet. So I was interested to see that.

Pixelman | Diffusion  1:10

Low Poly Duck | Saddle  1:14
All right, do you think we should keep on going? It might be worth while for us to save the time and just keep on going?

Pixelman | Diffusion  1:21
Yes. So I was just wrapping up on on Diffusion team, and can I get a little bit of the background, but essentially, just to summarize it again. We're a team of Cosmos, now it's mostly and a few of us come from Ethereum DeFi and the partner team that comes from the Cosmos ecosystem is really embedded into the Cosmos ecosystem, have worked to inter chain with a bunch of the Cosmos contributors, etc. And, you know, there was a lot of frustration and that was when when we, you know, realized it that there was not much or enough DeFi in Cosmos.

So when Evmos announced and eventually launch, you know, we saw it as an opportunity to support the DeFi ecosystem on Cosmos, because it's so easy to deploy apps on the EVM right now that we saw an opportunity to bootstrap liquidity for DeFi projects on on Evmos and in that way support the whole DeFi Cosmos ecosystem. So that's where we're coming from. Again, it's kind of like a constellation of the team and happy to answer any questions at the end. If you guys want to get more specific.

Low Poly Duck | Saddle  2:42
Yeah, for sure. That's great to hear that. I tell you what, I'm beyond chuffed that we're discussing AMMs right now. I've been doing my best to learn about Evmos. But AMMs are in fact right up my alley. So surely you guys have some experience on the user side, right? This might seem like a bit of a strange question, but it's sort of the world we're living in now. What protocols, builders or even unicorns inspired you to start this product? Right? Constant product AMMs are among the most forked protocols in the ecosystem, right? I'm sure we remember the flood of PancakeSwap forks. What plans do you have to sort of stand out in the crowd?

Pixelman | Diffusion  3:24
Yeah, so we weren't necessarily in swap, we were obviously inspired by we fork Uniswap the other day, right? At least partly, right? Other parts of the protocol are from other protocols, some custom code. So far, we try to limit the amount of code that we push ourselves because of security reasons, right? You know, code that's been audited several times is better than a custom code, especially nowadays, it's really hardto get a proper audit, or it takes really long. And but overall we really see this as you know, for us Diffusion is I don't know if this is the correct verb, but we really see this as a way to help the Cosmos ecosystem. Nothing. Of course, you know with what I've built a great project to the community and it would build this for them, but we see this as a small contribution to help the whole Cosmos ecosystem.

And in order for any VM project, in this case, Evmos which is part of the Cosmos right? To be successful. There has to be enough liquidity. The primitives have to be there. And an AMM is one of the one of the most fundamental elements of of an EVM or any Chain whatsoever, right? Look at Osmosis, right now in Cosmos. You can look at the layer two levels, most of layer one is really dominating. So in order to enable a bunch of other use cases like lending, for instance, at some point, different types of money markets, indexes, to connect with that you need an AMM, right? And you also need a stable swap like in Saddle. So and really we wanted to be part of that.

We have, you know, we're well connected in Cosmos, we know the ecosystem, we know that people, we know, how you navigated. So we thought ourselves that we would create a lot of value by launching this and to your second question of how we're thinking about sending out, we really want to focus on sustainable liquidity like that's, that's a term that we're going to try to push more in the coming days and weeks. That is our focus, like, right now, yes, like, product features are great, different types of like innovation on the economic side of things are great, and we're definitely planning to do that. But right now, the focus is to bring sustainable liquidity to Evmos. And I mean, right now, I think the vision has been substantially successful in the sense of that were brought really solid organic liquidity.

Like TVL, at the end of the day is really just a vanity metric. And it's nothing without volume and it's nothing without transactions, right? So I think right now we're doing okay, in relative terms to the TVL and Evmos, but the TVL on Evmos is still little. It needs to grow, and we want to help that, we want to help catalyze that. So again, you know, our focus right now and the way we want to stand out and we want people to recognize and understand what we do is by bringing sustainable liquidity to the ecosystem. And again, if you want to talk about new product features in our roadmap, like down the road, we definitely also have that, but I'm happy to do so. But again, I want folks to keep that in mind that that is our goal right now, stainable liquidity.

Low Poly Duck | Saddle  7:13
Excellent. Yeah, I'm not trying to soak too much alpha out here. Maybe we could kick it over to Christian for a moment. Christian, what can we expect from this exclusivity agreement? Right? How will this benefit the user bases of our platforms?

Christian | Saddle  7:27
Yes, so the big phrase here is liquidity fragmentation. So this is one of the reasons we're also very close with our partners over at Nomad. Now, the issue when you launch to a new blockchain is initially liquidity is very sparse. And initially liquidity can be can be fragmented across different partners. So when it comes to stable swap, stable swaps has to be the backbone of much of DeFi, right? People are still thinking in dollars, people are still operating in dollars, they want the stablecoins.

And if the stablecoins you're using are split up between A) different versions of bridge tokens, and B) different stable swap providers, then markets become far more inefficient. And so in order to mitigate that, we want to work together closely with other partners to make sure that the capital in the initial nascent days of the new blockchain DeFi ecosystem, that a lot of that initial liquidity gets concentrated, a lot of that initial liquidity stays consistent with the tokens you're using. And that DeFi can the seed that is defined this nascent blockchain can  blossom in a way that is not obstructed by needless fragmentation of liquidity. So when you work together with another protocol or bridge, what you do is A) you're avoiding having say, you know, three, four different versions of USDC, and then B) If you do what we're doing with Diffusion, you do a token swap, A) you are invested in the success of the other protocol, which is a great way to align incentives, and B) you can redistribute a lot of those incentives to liquidity providers that are providing liquidity on to in our case, Saddle's liquidity pools. So now we get to attract more capital, we get to make those swaps more efficient since our liquidity goes up. But then also we had to kind of catalyze that whole flywheel by taking some in this case, DIFF tokens and add them as liquidity mining incentives to liquidity providers in our pool.

Now there's actually a further benefit which is we bring in into the fray by further incentivizing people depositing their liquidity into our in this case 3pool which is USDC, USDT, and Frax. The benefit of adding extra incentives on top of this is that now we got to increase liquidity to the Frax ecosystem. Specifically on Evmos, we also have the same pool on Ethereum. So that's good for Frax. And we're close with Frax and we want to help them out as well. But then also you it further increases the utilization of USDC and USDT bridged through Nomad.

And so this further consolidates a lot of the initial liquidity into these Nomad bridge tokens, which is what you want, because if once stableswap providers using Nomad, the other still swap providers using an alternative bridge, you get run into that fragmented liquidity problem yet again. And so this is a really good way of aligning incentives between Nomad between Evmos between Diffusion and Saddle. So we're all getting on the same page. We're all avoiding liquidity fragmentation. And we're and the goal is to shore up as much capital as possible. So everybody walks away happy. And that the ultimate result is that the user using Evmos further DeFi needs, walks away happy and without running into any roadblocks.

Low Poly Duck | Saddle  11:10
Right, so this is about providing a nice, smooth, hitch free experience. I get that. So speaking of incentives, Diffusion Pixelman, maybe you could tell me a little bit about this DIFF token. Okay, how does it work? What can I expect to do with it? In the future? Right? Are you going full governance mode?

Pixelman | Diffusion  11:35
So the Diffusion token, is essentially the underlying token of the protocol. As of right now, the token is really a mechanism to deliver the intrinsic value of the protocol to its holders, or to the Diffusion token holders. How do we do that? So basically, if you're a Diffusion token holder, you can stake your Diffusion into our xDIFF, it's our stake top on a protocol basically on the app, we call it the Diffusion bar or and you would get essentially in exchange.

Right now, the protocol is collecting fees, so every time somebody trades, they pay 0.3% of their trade to the pool, right. And if that's 0.3% 0.05 which equals to a six, that's your 3.3% percent goes to the protocol fees, and 50% of the protocols fees go to the Diffusion holders. And what are we doing with that? So essentially, what we're doing, the more the protocol gets used, the more volume is in Diffusion, the more value we delivery to its holder again, right? So and, you know, here's some interesting alpha type during yesterday. Right now, given the volume that we have had since the launch, for all the Diffusion that stakes on the Diffusion bar, right now on the staking contract on staking vault, the APR right now of the volume that we've generated, the APR right now would be around something like 33%.

And the more volume Diffusion generates, the better that APR. So basically, if you're holding Diffusion and staking it there, you're essentially capturing the intrinsic economic value of the protocol. And its just like a stock, right, like when you hold Microsoft stock or Apple stock and the company's distribute dividends, at the end of the day, that's pretty much what Diffusion is this but the protocol automatically goes right, the more it's the value of its token as a function of the volume that's in the protocol. That's number one, and one of the most crucial ones. And then number two, we're definitely going to launch governance.

There are a few things that we need to do first, and coordinate also with the Evmos to do that to get there. But absolutely, the Diffusion will be also a governance token. And also, again, we would definitely have a more mid to long term roadmap, where the token is going to take the center stage in some of the innovations that we're thinking of in terms of tokenomics evolutions of the farms that we have right now, even evolution of the seeking contract that we have, and so on. So again, one is economic value. And this one right now for the short term is governance and then a more crucial role in the whole tokenomics story for the token.

Low Poly Duck | Saddle  14:58
Excellent, and I appreciate it the Alpha. Actually, we are coming pretty close to our 30 minute mark here. And well, I could listen to you guys school me on Evmos all day. I would absolutely love to hear from our audience while we have the time. So I'm going to open up the floor to some questions before we take some closing remarks from our guests. So if you do have a question, feel free to raise your hand and we'll go on and bring you up on stage here. Okay, while we're waiting/ Actually, I usually like to fill the empty air, you see how I did there with a joke to fill the empty. Are you ready? Okay, you used to be able to fill your tires up for free at the gas station, right? But now it cost like $1 or something. Aye? Little inflation humor for you, little contemporary inflation humor. All right.

Final call for questions. Do we have any? No questions at the moment?

Pixelman | Diffusion  16:06
I can add something I just wanted to I didn't say anything about the Saddle partnership. I just want to briefly Chris explain it very well and it's well written in the proposal. But I just want to mention that the pool of the farm that we're going to incentivize, the Saddle token that we're getting from Saddle is initially going to be the first farm on Diffusion that will have double incentives. What does that mean, that when you farm your liquidity position for that pool, you are going to receive not just Saddle tokens, but also the Diffusion tokens, right? And that is going to be the first farm to have double rewards. So I don't know if that comes in alpha, but it's definitely something now that we're doing as well.

Low Poly Duck | Saddle  16:54
It definitely counts, that definitely counts as an alpha. And absolutely, you can take take some time for some closing statements there. Additionally, can you tell our audience where they can keep up with you? Right? What feed should we keep our eyes, you know, fuse to?

Pixelman | Diffusion  17:13
Yeah, I think our Twitter is probably the or best performing channel so far. We have an amazing community manager who's doing an amazing job. Very tense person, but he's great. And we are this group is also very helpful in case you want support in case you have more questions that need our conversation. I think this could also very great, well suited for that. But right now most of our alphas much more content strategy, or educational content as well. I comment on Twitter mostly. So make sure you stay tuned on Twitter.

Christian | Saddle  17:56
Yeah, and just to take you back off Diffusion right there, the pool that they are incentivizing doubly so, with DIFF tokens and SDL tokens is going to be specifically the Evmos Frax token pair. And so, just to loop back to what I said earlier, that is further aligning incentives between not only us in Saddle, not only Diffusion, but also Frax. Because there's gonna be extra incentive to liquidity provide with Frax tokens, which increases the utility of the FXS token, the governance token increases the market cap of the Frax stablecoin as well. So this partnership, I think, is a really good attempt at hold locking arms between all these different partners, Diffusion, Saddle, Frax, Nomad and ultimately trying to increase the user experience by avoiding liquidity fragmentation across the Evmos ecosystem as a whole. But to also mirror what Diffusion said, you can absolutely get involved with Saddle as well. We offer several bounties for for anyone who wants to get involved by tackling some technical or non technical bounties, yet you help us we help you, you walk with little little cash in your pocket. And ultimately, you get to contribute to something a little bit larger than yourself. And it's ultimately something grounded, right. We're dealing with stablecoins here. This is something very real. This is something that helps people, whether it's renumeration, whether it's you know, cash payments, things of that sort. So yeah, same deal. Follow us on Twitter, hop in our Discord. Say hi. We'd love to hear from you.

Low Poly Duck | Saddle  19:34
Amazing, and thank you so much again, guys for being here. Also, remember that here at Saddle, we are still gearing up for our token unlock, which is just around the corner now. And of course that means that the VE model isn't far either, which should bring with it many more exciting partnerships. Very very exciting time to be an SDL holder and surely a DIFF holder as well. And if you aren't one yet, going up with Christian said we are still running B4B, right? This is our bounty program with Encode club, okay? So you can put on your cowboy boots with your chaps and get to hacking. Okay. But a prerequisite to some of these bounties is our Saddle Stallions program. Okay, this is our ambassador initiative that acts as a bit of a stepping stone for those interested in following the path from community member to core contributor. Okay, which is another thing we've laid out in some detail recently. And of course, the tried and true method is always available, we have our new 3pool that we've been talking about here on both Evmos and Mainnet consisting of USDT C and Frax, in an attempt to sort of set a new standard for the ecosystem, right. So get out there and but actually don't get out there, stay inside on your computers, but do enjoy your week. And please remember to wear your funniest pants. And if you don't own Funny Pants, just buy some. Okay, it's an easy way to brighten your day, regardless of what your portfolio's looking like. Thanks again to Christian and Diffusion to Pixelman behind the camera there. So great to have you and I look forward to the partnership. Later dudes and too-da-loo

Pixelman | Diffusion  21:11
Thanks, everyone.

Bianca | Saddle  21:14
Jamie before you in Scorpio has a question. Oh, excellent.

Low Poly Duck | Saddle  21:18
Can you bring him up on stage for me?

Bianca | Saddle  21:20
Yeah, he's a speaker.

ScorpioRising | Twitter  21:22
Hey, yeah, thanks for having me on. I just want to ask.

Pixelman | Diffusion  21:39
Did he drop?

Low Poly Duck | Saddle  21:42
Yeah. Should we give him one more minute to pop back in?

Pixelman | Diffusion  21:47
Come back soon. Yeah. I see on time so that works.

Low Poly Duck | Saddle  21:52
Yeah, excellent. Let's get it. Oh, here we go.

ScorpioRising | Twitter  21:55
Hey, really sorry about that. I've really bad connection. I was just wondering

Low Poly Duck | Saddle  22:03
So close that time.

Pixelman | Diffusion  22:10
I wonder if it is intentional.

Low Poly Duck | Saddle  22:13
I mean, that would be great. I mean, that would be the best joke so far of this Twitter space

What do you think Diffusion should we give him one more try?

Pixelman | Diffusion  22:27
I didn't catch his handler. But I think you can. If he comes back, we can just reach out via DMs on Twitter. So I think we're okay. There he is. Let's give him one more chance.

Low Poly Duck | Saddle  22:44
One more try Scorpio.

ScorpioRising | Twitter  22:46
What is this about the cowboy chaps?

Low Poly Duck | Saddle  22:51
Oh, excellent. Yeah, you can absolutely do all of your Saddle programming in cowboy chaps and a cowboy hat. And actually my boss at works even lets me work in a duck suit. If you believe it.

ScorpioRising | Twitter  23:04
Oh wow.

Christian | Saddle  23:04
Yeah, the cameras got to be off for that though.

ScorpioRising | Twitter  23:07
I have to sign a nondisclosure agreement. Some interesting stuff. But cool. I miss most of this. I don't really know what this is. Is this a another crypto or is this like a (-)? What is Diffusion?

Low Poly Duck | Saddle  23:28
Excellent. I love it. And with that, I think we're going to close off the Twitter space. Thank you so much, guys for coming.

Christian | Saddle  23:38
Thanks, everyone.

Pixelman | Diffusion  23:39
Thank you. Thanks, everyone.

Transcribed by bandit, "Big Bambino"

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