YOLO

VeradiVerdict - Issue #141

For most Americans, investing in the stock market has increasingly come to mean buying a low-fee, well-diversified index fund. Index funds, typically from the “Big Three”—Vanguard, BlackRock, and State Street—now control nearly 30% of the US equities market. And for good reason; for most retail investors, this “passive management” far exceeds the returns they could earn in the market otherwise.

But this year has revealed a new trend: the return of active trading for small investors. Earlier this year, r/WallStreetBets, a decentralized army of hobbyist day traders, sent the price of GameStop soaring, in addition to other “meme stocks” like AMC. In crypto, too, a number of assets, such as Dogecoin, have seen incredible speculation from this crowd of empowered traders. In April, Robinhood and Coinbase, two popular trading tools, grabbed the top two spots in the App Store, typically occupied by the likes of TikTok and Instagram.

In short, we’re seeing a radical shift in the way consumers view financial markets. They are, for many, now a source of entertainment and community, not solely a way to make money.

What is YOLOrekt?

YOLOrekt, launched in early 2019, was a trader vs. trader game that allowed users to bid on the price of Ethereum in short bursts. The decentralized application (dApp), despite being launched in a bear market, quickly reached the top of DappRadar and, at its peak, processed over $100k in volume per day.

This month, after a recent round of fundraising that Pantera participated in, YOLOrekt is back! It contains the same fun, gamified experience as the beloved old version, but has a number of new improvements.

For one, while the platform is still built on Ethereum, this time it leverages Polygon’s layer-2 scaling technology to make transaction fees virtually negligible. In addition, using YOLOrekt is now easier than ever—by integrating with Wyre, users can purchase crypto directly from the application if they don’t have any already.

How does the game work?

YOLOrekt allows users to speculate on the short-term fluctuations of various popular assets, including Bitcoin (BTC), Ethereum (ETH), Tesla (TSLA), GameStop (GME), and others.

Each “round” takes a total of three minutes and has several phases. Let’s imagine we’re bidding on Ethereum’s price, for example:

  1. “Strike Price” discovery. YOLOrekt uses APIs from various exchanges and trusted oracles  (e.g., Coinbase, Chainlink) to have a constant price feed of the underlying asset. In our example, the game’s “Strike Price” is calculated by finding Ethereum’s average price over a period of 30 seconds.

  2. Betting period. Now that we have our “Strike Price,” the betting pool’s participants are given 60 seconds to place their bets. They have a simple decision: will Ethereum’s price be above or below the “Strike Price” in 90 seconds? There’s an incentive to bet quickly to neutralize the “last mover advantage”—the earlier in the betting period that you make your decision, the higher your rewards!

  3. Wait-and-see. Once the betting period has ended, participants can sit back, relax, and watch the price of the asset fluctuate. If, at the end of the 90 second period, they correctly predicted whether it was above or below the “Strike Price,” they split the pool with the other winners, proportional to how much they put in. YOLOrekt, for facilitating these trades, takes a 3% fee floor on the winning pool.

These games are meant to be low-stakes and fast-paced, allowing users to move fluidly from one game to the next. The mobile and web applications are also intuitive and frictionless, following the example of Robinhood and other gamified financial applications.

Can I be a liquidity provider?

Many decentralized exchanges are automated market makers (AMMs), such as Uniswap, and incentivize users to provide liquidity by offering them attractive yields. In short, users are rewarded for their work helping these AMMs operate. But what does it mean to “provide liquidity” to YOLOrekt, not a traditional AMM?

Well, it’s different from the liquidity provision DeFi participants are used to. In the words of the team:

Liquidity mining on YOLOrekt is unique because the pool plays with or against the players, depending on odds. Asymmetric Impermanent Loss in the pool reduces losses to one side. Liquidity providers can further stake their YOLO LP tokens to receive additional rewards in YOLO.

Put simply, liquidity providers help “even out” the betting pools by injecting liquidity on the side that is under-financed. Since the risk profile of YOLO LP pools are higher than lending platforms, they earn game fees of 3% or more, which—over the course of hundreds of games—can amount to significant rewards. To maximize returns, LPs can even stake these earnings (in the form of the YOLO token) to earn an additional staking reward.

What is the YOLO token?

YOLO is YOLOrekt’s native token, primarily used for bootstrapping liquidity in the early stages of the project, which will be issued in July.

YOLO’s token issuance model is unique: instead of being released on a single blockchain, it will be available for purchase on both Ethereum (with ETH) and Polygon (with mETH). This is the first time a “synced token dual-issuance,” as the team calls it, has occurred:

A multi-issuance token employs a relatively novel approach of running token issuance on multiple blockchain platforms concurrently, allowing users to buy tokens on either platform. At the end of the token issuance, coordination logic will be invoked to calculate the actual price per token based on the contributions across both blockchain platforms.

For more details about the upcoming token issuance, check out their full post.

What’s next?

After months of preparation, the YOLO token is finally ready to go live in the next few weeks. About a month after token issuance, the newly-redesigned YOLOrekt platform will be available for use, both as a sleek mobile app and in-browser game. 

We’ve been thrilled to see the community’s excitement around the project so far. One thing is clear: there’s demand for a crypto-native speculative gaming product, one that preserves the community’s values of transparency, censorship-resistance, real-time micropayments, and financial inclusion. Most importantly, YOLOrekt’s focus on an amazing user experience—something sometimes under-emphasized in the industry—will hopefully propel more mainstream interest in speculating on and learning about cryptocurrency.

YOLOrekt sits at the perfect intersection of these big-picture trends, which don’t show any sign of slowing down. We’re still in the early innings and are ecstatic to see where the project goes.

- Paul V

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ETHEREUM GAS LIMIT PROJECT

This week, the Ethereum Gas Limit Project (EGL) was announced, an important step in helping resolve Ethereum’s gas limit disagreements at a community level. Here are the highlights:

  • The problem: Ethereum’s gas limit (functionally the “block size”) is determined by mining pools, not the community. These pools are often centralized, can sometimes have different incentives than the network’s users, and have difficulty knowing what the community wants.

  • $EGL is a token designed to resolve these issues without a hard fork. Anyone can temporarily stake their ETH to receive $EGL, a quasi-governance token which allows owners to vote on their desired gas limit. While not binding, mining pools are rewarded for following the community’s vote with $EGL, which offsets any potential short-term losses they may incur from the decision. At scale, EGL incentivizes the community to identify and select the optimal gas limit.

  • With EIP-1559 and ETH 2.0 on the horizon, EGL also serves as a smoothing device that eases the transition to these monumental network changes. Even with these changes, though, the gas limit issue is far from solved—there remains a need for aligning incentives between the community and decision-makers in a transparent and game-theoretic way, which is EGL’s objective.

If you’re interested in learning more, be sure to read the project’s comprehensive post and join the community.


DIGESTS

NFTs would change the whole game of the art industry, says Mary Ma

NFT actually have a solid potential to change the whole game of the art industry, especially on enhancing artists’ creativity by building an art sanctuary to help them craft art in a moisten way.


NEWS

Brave takes aim at Google with privacy-protecting search engine beta

Brave hopes users will want to search the web without being tracked.

Morgan Stanley Co-Leads $48 Million Investment To Bring Blockchain To Capital Markets

Digital securities platform Securitize has big plans to drive adoption of tokenized securities after raising $48 million in a Series B funding round led by Blockchain Capital and investment funds managed by Morgan Stanley.

Daniel Loeb’s Third Point Leads $27M Investment in Crypto Compliance Startup CipherTrace

The hedge funder’s latest crypto bet adds fuel to CipherTrace’s growing crypto compliance and investigations business.


REGULATIONS

Huobi’s Tighter Derivatives Rules Leave Chinese Traders Scrambling for Alternatives

Binance may gain customers because of Huobi's new restrictions.

SEC Delays Decision on Valkyrie Bitcoin ETF

The SEC designated Aug. 10 as the revised date when it will approve or disapprove Valkyrie's application.


IN THE TWEETS


NEW PRODUCTS AND HOT DEALS

Crypto data firm Kaiko closes $24 million Series A funding round

Kaiko, a Paris-based crypto market data provider, has secured $24 million in a Series A round led by Anthemis and Underscore VC.

Yield closes $10mm funding round led by Paradigm

We are excited to announce the close of a $10mm Series A funding round led by Paradigm.


LETS MEET UP

Paris, July 20-22, Ethereum Community Conference 4

New York City, July 26-28

Los Angeles, July 29-30

Coffee meetings or walks in San Francisco


ABOUT ME

Hi, I’m Paul Veradittakit, a Partner at Pantera Capital, one of the oldest and largest institutional investors focused on investing in blockchain companies and cryptocurrencies. I’ve been in the industry since 2014, and the firm invests in equity, early stage token projects, and liquid cryptocurrencies on exchanges. I focus on early-stage investments and share my thoughts on what’s going on in the industry in this weekly newsletter.