Conversation with Jeff Emmett from Common Stack

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General Conclusion

We’ve talked about bonding curves so many times. You’d think I’ve exhausted the content. HAH! Not a chance.

Bonding curves are more than just a “cool crypto feature”. It’s an interface to allow for variables in the system to interact. It’s the basic underlying structure to build all these DeFi applications and products.

We’re very lucky to have Jeff Emmett with us today! In this episode, we will uncover the various DeFi use-cases, the types of bonding curve, the generalised massive model, other use-cases like insurtech and country governance. Enjoy!

Jeff from Common Stack

Today we have with us Jeff Emmett from the Common Stack team! You can follow him on twitter at @JeffEmmett.

Lisa: Today we talked a little bit more about bonding curves, specifically augmented bonding curve, the generalized models of bonding curve as well as the various token engineering and first principles models to think about, when it comes to bonding curves.

Welcome Jeff!

State of DeFi

I think DeFi very interesting but DeFi is also interesting in a way where everyone just goes to DeFi because there are returns to it. I think whatever Common Stack is doing, whatever like Giveth is doing, whatever we’re talking about, all these different kind of systems are so important because they are the basic architectural building blocks before this entire thing can boom!

Right now, DeFi is booming and I’m very very happy about that. Because we need that kind of mass adoption. But I think we’re not at that stage yet, where we can just have everyone going to DeFi and forgetting to build the other tech stacks that we need in the system.

Jeff: Yeah for sure, and I mean that’s one way of getting people’s attention. I mean I got to the crypto space because I heard this Ethereum thing was blowing up and I was like “What?!” and I started looking into it. And i was like “oh yeah it’s going up” and i was like “oh okay I get (it) a bit” and then I got interested and then I started reading and then i was like “oh wow this can do a lot more than just , make you money!”

DeFi to get more people into the space. And with it, attract builders and shakers.

I mean it’s getting people’s attention, which is good but yeah I agree the whole yield farming, borrow to lend to borrow to lend, doesn’t seem to be sustainable. I mean this is like the it’s the engineering consideration that doesn’t factor into DeFi a lot of the time is we’re building these modular components and they’re all like stacking on top of each other but if there’s a critical failure down here it’s like a house of cards that all that all comes down so it’s really like everyone’s building parts but no one’s considering synthesizing those parts into a hole and understanding the systemic effects or the systemic flaws that are built into some of these components so there’s it’s still it’s still a risky space for sure but it’s it’s great to see the enthusiasm and everything it’s just wish it was more for social impact than it was for personal profits but it’s something.

Lisa: Yeah it’s a good step towards the right direction. Not exactly at the end point that we’re looking at, but it’s getting there.

…

DAICO vs ABC

Lisa: Yeah absolutely I agree I was looking at DAICO. DAICO and augmented bonding curve are almost quite similar. The only fact is that with DAICO, you have a form of governance. Whereas augmented bonding curve is 100% on-chain governance.

DAICO is a mix of both systems level governance plus human voting mechanism.

Jeff: Actually that’s funny. I have an article I just put the rough draft out to our comms team. It should be coming out hopefully next week, talking about the augmented body curve as a tool for DAICOs.

DAICOs are sort of the more responsible ICO. The terminology actually is like DAO + ICO. You have a token issuance mechanism, which in this case would be the bonding curve, and then you have it connected to a DAO.

People can make decisions over how those funds are spent. So this is actually the difference between the augmented bonding curve and a typical bonding curve.

The bare minimum bonding curve is just a collateral pool, so you put reserve into a smart contract say DAI, and you get some token out and that DAI is held in a collateral pool. It could be one to one it could be two to one, it could be one to two.

The difference with the augmented bonding curve is you’re creating another pool of funds so you have the collateral pool like every bonding curve. But you also have a funding pool.

So when you put in DAI say 50 (and again this is the design space of the bonding curve you can set it up however you like), 50% of the DAI goes into the reserve and 50% of the DAI goes into the funding pool.

Now the funding pool can be governed through conviction voting or through regular on-chain voting. However you see fit. Those funds can be used by a project so now, we have a way that investors can give a project money without the project founders just picking up the money and going to the cayman islands and no one ever hearing from them again. Which is some of the problems we had in the 2017 ICO craze. Now we have sort of a more responsible accountable fundraising system where some of the funds can go into collateral to give investors peace of mind if they want to exit this token there is always collateral they can always exit.

There’s liquidity just like Uniswap or Bancor offered today, but for that specific token and there’s also this funding pool so the projects interests are aligned with the interests of the investors, with the interests of the users.

Now there’s sort of some oversight. Like agreement explicit agreement that the project can use 30% of the funds as long as they’re going through the appropriate proposal system etc and then the investors always have collateral to exit the token if they don’t believe in what the team is doing.

It really helps to align the incentives especially for small projects that don’t have a lot of trading volume in that case wouldn’t the amount being put in will always be more than the amount taken out. Because whenever I put money into the bonding curve, let’s say 30% goes into the funding pools, would be funding different projects. The only way for me to take back the same amount that I put in is for these projects to generate some sort of return for more people to come in.

Conclusion

Bonding curves are going to be the underlying systemic structure for crypto products moving forward in the future. There are a lot of ways to get involved now. You can either build these underlying systemic structures, help to educate people to bridge the gaps or build products that will sit on top of bonding curves.

Bonding curves are more than just DeFi applications like on Uniswap, Bancor and Curve. It can also be used in Torrent networks, personal tokens and a way to allow for new incentive structures. The future is here. We are creating this new future.

Currently, we are at where the 70s and 80s are for the internet. It is the golden age to be alive!

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