Decentralized perpetual may be the next crypto market boom; with tons of perpetual popping up, let's look at two protocols that offer organic, non-inflationary yields.

Decentralized derivatives exchanges' market share has increased tenfold in a year, but it's still 2% of CEXs'. DEXs have a long way to go before they can compete with centralized exchanges in speed, liquidity, user experience, and composability.

I'll cover gains.trade and GMX protocol in Polygon, Avalanche, and Arbitrum. Both protocols support leveraged perpetual crypto, stock, and Forex trading.

Why these protocols?

Decentralized GMX Gains protocol

Organic yield: path to sustainability

I've never trusted Defi's non-organic yields. Example: XYZ protocol. 20–75% of tokens may be set aside as farming rewards to provide liquidity, according to tokenomics.

Say you provide ETH-USDC liquidity. They advertise a 50% APR reward for this pair, 10% from trading fees and 40% from farming rewards. Only 10% is real, the rest is "Ponzi." The "real" reward is in protocol tokens.

Why keep this token? Governance voting or staking rewards are promoted services.

Most liquidity providers expect compensation for unused tokens. Basic psychological principles then? — Profit.

Nobody wants governance tokens. How many out of 100 care about the protocol's direction and will vote?

Staking increases your token's value. Currently, they're mostly non-liquid. If the protocol is compromised, you can't withdraw funds. Most people are sceptical of staking because of this.

"Free tokens," lack of use cases, and skepticism lead to tokens moving south. No farming reward protocols have lasted.

It may have shown strength in a bull market, but what about a bear market?

What is decentralized perpetual?

A perpetual contract is a type of futures contract that doesn't expire. So one can hold a position forever.

You can buy/sell any leveraged instruments (Long-Short) without expiration.

In centralized exchanges like Binance and coinbase, fees and revenue (liquidation) go to the exchanges, not users.

Users can provide liquidity that traders can use to leverage trade, and the revenue goes to liquidity providers.

Gains.trade and GMX protocol are perpetual trading platforms with a non-inflationary organic yield for liquidity providers.

GMX protocol

GMX is an Arbitrum and Avax protocol that rewards in ETH and Avax. GLP uses a fast oracle to borrow the "true price" from other trading venues, unlike a traditional AMM.

GLP and GMX are protocol tokens. GLP is used for leveraged trading, swapping, etc.

GLP is a basket of tokens, including ETH, BTC, AVAX, stablecoins, and UNI, LINK, and Stablecoins.

GLP composition on arbitrum

GLP composition on Avalanche

GLP token rebalances based on usage, providing liquidity without loss.

Protocol "runs" on Staking GLP. Depending on their chain, the protocol will reward users with ETH or AVAX. Current rewards are 22 percent (15.71 percent in ETH and the rest in escrowed GMX) and 21 percent (15.72 percent in AVAX and the rest in escrowed GMX). escGMX and ETH/AVAX percentages fluctuate.

Where is the yield coming from?

Swap fees, perpetual interest, and liquidations generate yield. 70% of fees go to GLP stakers, 30% to GMX. Organic yields aren't paid in inflationary farm tokens.

Escrowed GMX is vested GMX that unlocks in 365 days. To fully unlock GMX, you must farm the Escrowed GMX token for 365 days. That means less selling pressure for the GMX token.

GMX's status

These are the fees in Arbitrum in the past 11 months by GMX.

GMX works like a casino, which increases fees. Most fees come from Margin trading, which means most traders lose money; this money goes to the casino, or GLP stakers.

Strategies

My personal strategy is to DCA into GLP when markets hit bottom and stake it; GLP will be less volatile with extra staking rewards.

GLP YoY return vs. naked buying

Let's say I invested $10,000 in BTC, AVAX, and ETH in January.

• BTC price: 47665$

• ETH price: 3760$

• AVAX price: $145

Current prices

• BTC $21,000 (Down 56 percent )

• ETH $1233 (Down 67.2 percent )

• AVAX $20.36 (Down 85.95 percent )

Your $10,000 investment is now worth around $3,000.

How about GLP? My initial investment is 50% stables and 50% other assets ( Assuming the coverage ratio for stables is 50 percent at that time)

Without GLP staking yield, your value is $6500.

Let's assume the average APR for GLP staking is 23%, or $1500. So 8000$ total. It's 50% safer than holding naked assets in a bear market.

In a bull market, naked assets are preferable to GLP.

Short farming using GLP

Simple GLP short farming.

You use a stable asset as collateral to borrow AVAX. Sell it and buy GLP. Even if GLP rises, it won't rise as fast as AVAX, so we can get yields.

Let's do the maths

You deposit $10,000 USDT in Aave and borrow Avax. Say you borrow $8,000; you sell it, buy GLP, and risk 20%.

After a year, ETH, AVAX, and BTC rise 20%. GLP is $8800. $800 vanishes. 20% yields $1600. You're profitable. Shorting Avax costs $1600. (Assumptions-ETH, AVAX, BTC move the same, GLP yield is 20%. GLP has a 50:50 stablecoin/others ratio. Aave won't liquidate

In naked Avax shorting, Avax falls 20% in a year. You'll make $1600. If you buy GLP and stake it using the sold Avax and BTC, ETH and Avax go down by 20% - your profit is 20%, but with the yield, your total gain is $2400.

Issues with GMX

GMX's historical funding rates are always net positive, so long always pays short. This makes long-term shorts less appealing.

Oracle price discovery isn't enough. This limitation doesn't affect Bitcoin and ETH, but it affects less liquid assets. Traders can buy and sell less liquid assets at a lower price than their actual cost as long as GMX exists.

As users must provide GLP liquidity, adding more assets to GMX will be difficult. Next iteration will have synthetic assets.

Gains Protocol

Best leveraged trading platform. Smart contract-based decentralized protocol. 46 crypto pairs can be leveraged 5–150x and 10 Forex pairs 5–1000x. $10 DAI @ 150x (min collateral x leverage pos size is $1500 DAI). No funding fees, no KYC, trade DAI from your wallet, keep funds.

DAI single-sided staking and the GNS-DAI pool are important parts of Gains trading. GNS-DAI stakers get 90% of trading fees and 100% swap fees. 10 percent of trading fees go to DAI stakers, which is currently 14 percent!

Trade volume

When a trader opens a trade, the leverage and profit are pulled from the DAI pool. If he loses, the protocol yield goes to the stakers.

If the trader's win rate is high and the DAI pool slowly depletes, the GNS token is minted and sold to refill DAI. Trader losses are used to burn GNS tokens. 25%+ of GNS is burned, making it deflationary.

Due to high leverage and volatility of crypto assets, most traders lose money and the protocol always wins, keeping GNS deflationary.

Gains uses a unique decentralized oracle for price feeds, which is better for leverage trading platforms. Let me explain.

Gains uses chainlink price oracles, not its own price feeds. Chainlink oracles only query centralized exchanges for price feeds every minute, which is unsuitable for high-precision trading.

Gains created a custom oracle that queries the eight chainlink nodes for the current price and, on average, for trade confirmation. This model eliminates every-second inquiries, which waste gas but are more efficient than chainlink's per-minute price.

This price oracle helps Gains open and close trades instantly, eliminate scam wicks, etc.

Other benefits include:

• Stop-loss guarantee (open positions updated)

• No scam wicks

• Spot-pricing

• Highest possible leverage

• Fixed-spreads. During high volatility, a broker can increase the spread, which can hit your stop loss without the price moving.

• Trade directly from your wallet and keep your funds.

• >90% loss before liquidation (Some platforms liquidate as little as -50 percent)

• KYC-free

• Directly trade from wallet; keep funds safe

Further improvements

GNS-DAI liquidity providers fear the impermanent loss, so the protocol is migrating to its own liquidity and single staking GNS vaults. This allows users to stake GNS without permanent loss and obtain 90% DAI trading fees by staking. This starts in August.

Their upcoming improvements can be found here.

Gains constantly add new features and change pairs. It's an interesting protocol.

Conclusion

Next bull run, watch decentralized perpetual protocols. Effective tokenomics and non-inflationary yields may attract traders and liquidity providers. But still, there is a long way for them to develop, and I don't see them tackling the centralized exchanges any time soon until they fix their inherent problems and improve fast enough.

Read the full post here.

Key Takeaways:

Another hack. This time was different. This is a doozy.

Why? Nomad got exploited for $190m. It was crypto's 5th-biggest hack. Ouch.

It wasn't hackers, but random folks. What happened:

A Nomad smart contract flaw was discovered. They couldn't drain the funds at once, so they tried numerous transactions. Rookie!

People noticed and copied the attack.

They just needed to discover a working transaction, substitute the other person's address with theirs, and run it.

In a two-and-a-half-hour attack, $190M was siphoned from Nomad Bridge.

Nomad is a novel approach to blockchain interoperability that leverages an optimistic mechanism to increase the security of cross-chain communication.  — nomad.xyz

This hack was permissionless, therefore anyone could participate.

After the fatal blow, people fought over the scraps.

Cross-chain bridges remain a DeFi weakness and exploit target. When they collapse, it's typically total.

$190M...gobbled.

Unbacked assets are hurting Nomad-dependent chains. Moonbeam, EVMOS, and Milkomeda's TVLs dropped.

This incident is every-man-for-himself, although numerous whitehats exploited the issue... 

But what triggered the feeding frenzy?

How did so many pick the bones?

After a normal upgrade in June, the bridge's Replica contract was initialized with a severe security issue. The  0x00 address was a trusted root, therefore all messages were valid by default.

After a botched first attempt (costing $350k in gas), the original attacker's exploit tx called process() without first 'proving' its validity.

The process() function executes all cross-chain messages and checks the merkle root of all messages (line 185).

The upgrade caused transactions with a'messages' value of 0 (invalid, according to old logic) to be read by default as 0x00, a trusted root, passing validation as 'proven'

Any process() calls were valid. In reality, a more sophisticated exploiter may have designed a contract to drain the whole bridge.

Copycat attackers simply copied/pasted the same process() function call using Etherscan, substituting their address.

The incident was a wild combination of crowdhacking, whitehat activities, and MEV-bot (Maximal Extractable Value) mayhem.

For example, 🍉🍉🍉. eth stole $4M from the bridge, but claims to be whitehat.

Others stood out for the wrong reasons. Repeat criminal Rari Capital (Artibrum) exploited over $3M in stablecoins, which moved to Tornado Cash.

The top three exploiters (with 95M between them) are:

$47M: 0x56D8B635A7C88Fd1104D23d632AF40c1C3Aac4e3

$40M: 0xBF293D5138a2a1BA407B43672643434C43827179

$8M: 0xB5C55f76f90Cc528B2609109Ca14d8d84593590E

Here's a list of all the exploiters:

The project conducted a Quantstamp audit in June; QSP-19 foreshadowed a similar problem.

The auditor's comments that "We feel the Nomad team misinterpreted the issue" speak to a troubling attitude towards security that the project's "Long-Term Security" plan appears to confirm:

Concerns were raised about the team's response time to a live, public exploit; the team's official acknowledgement came three hours later.

"Removing the Replica contract as owner" stopped the exploit, but it was too late to preserve the cash.

Closed blockchain systems are only as strong as their weakest link.

The Harmony network is in turmoil after its bridge was attacked and lost $100M in late June.

What's next for Nomad's ecosystems?

Moonbeam's TVL is now $135M, EVMOS's is $3M, and Milkomeda's is $20M.

Loss of confidence may do more damage than $190M.

Cross-chain infrastructure is difficult to secure in a new, experimental sector. Bridge attacks can pollute an entire ecosystem or more.

Nomadic liquidity has no permanent home, so consumers will always migrate in pursuit of the "next big thing" and get stung when attentiveness wanes.

DeFi still has easy prey...

Sources: rekt.news & The Milk Road.

While we played checkers, we thought billionaires played 3D chess. They're playing the same game on a fancier board.

Every medium has nuances and norms. Texting is authentic and casual. A smaller circle has access, creating intimacy and immediacy. Most people read all their texts, but not all their email and mail. Many of us no longer listen to our voicemails, and calling your kids ages you.

Live interviews and testimony under oath inspire real moments, rare in a world where communications departments sanitize everything powerful people say. When (some of) Elon's text messages became public in Twitter v. Musk, we got a glimpse into tech power. It's bowels.

These texts illuminate the tech community's upper caste.

Checkers, Not Chess

Elon texts with Larry Ellison, Joe Rogan, Sam Bankman-Fried, Satya Nadella, and Jack Dorsey. They reveal astounding logic, prose, and discourse. The world's richest man and his followers are unsophisticated, obtuse, and petty. Possibly. While we played checkers, we thought billionaires played 3D chess. They're playing the same game on a fancier board.

They fumble with their computers.

They lean on others to get jobs for their kids (no surprise).

No matter how rich, they always could use more (money).

Differences A social hierarchy exists. Among this circle, the currency of deference is... currency. Money increases sycophantry. Oculus and Elon's "friends'" texts induce nausea.

Autocorrect frustrates everyone.

Elon doesn't stand out to me in these texts; he comes off mostly OK in my view. It’s the people around him. It seems our idolatry of innovators has infected the uber-wealthy, giving them an uncontrollable urge to kill the cool kid for a seat at his cafeteria table. "I'd grenade for you." If someone says this and they're not fighting you, they're a fan, not a friend.

Many powerful people are undone by their fake friends. Facilitators, not well-wishers. When Elon-Twitter started, I wrote about power. Unchecked power is intoxicating. This is a scientific fact, not a thesis. Power causes us to downplay risk, magnify rewards, and act on instincts more quickly. You lose self-control and must rely on others.

You'd hope the world's richest person has advisers who push back when necessary (i.e., not yes men). Elon's reckless, childish behavior and these texts show there is no truth-teller. I found just one pushback in the 151-page document. It came from Twitter CEO Parag Agrawal, who, in response to Elon’s unhelpful “Is Twitter dying?” tweet, let Elon know what he thought: It was unhelpful. Elon’s response? A childish, terse insult.

Scale

The texts are mostly unremarkable. There are some, however, that do remind us the (super-)rich are different. Specifically, the discussions of possible equity investments from crypto-billionaire Sam Bankman-Fried (“Does he have huge amounts of money?”) and this exchange with Larry Ellison:

Ellison, who co-founded $175 billion Oracle, is wealthy. Less clear is whether he can text a billion dollars. Who hasn't been texted $1 billion? Ellison offered 8,000 times the median American's net worth, enough to buy 3,000 Ferraris or the Chicago Blackhawks. It's a bedrock principle of capitalism to have incredibly successful people who are exponentially wealthier than the rest of us. It creates an incentive structure that inspires productivity and prosperity. When people offer billions over text to help a billionaire's vanity project in a country where 1 in 5 children are food insecure, isn't America messed up?

Elon's Morgan Stanley banker, Michael Grimes, tells him that Web3 ventures investor Bankman-Fried can invest $5 billion in the deal: “could do $5bn if everything vision lock... Believes in your mission." The message bothers Elon. In Elon's world, $5 billion doesn't warrant a worded response. $5 billion is more than many small nations' GDP, twice the SEC budget, and five times the NRC budget.

If income inequality worries you after reading this, trust your gut.

Billionaires aren't like the rich.

As an entrepreneur, academic, and investor, I've met modest-income people, rich people, and billionaires. Rich people seem different to me. They're smarter and harder working than most Americans. Monty Burns from The Simpsons is a cartoon about rich people. Rich people have character and know how to make friends. Success requires supporters.

I've never noticed a talent or intelligence gap between wealthy and ultra-wealthy people. Conflating talent and luck infects the tech elite. Timing is more important than incremental intelligence when going from millions to hundreds of millions or billions. Proof? Elon's texting. Any man who electrifies the auto industry and lands two rockets on barges is a genius. His mega-billions come from a well-regulated capital market, enforceable contracts, thousands of workers, and billions of dollars in government subsidies, including a $465 million DOE loan that allowed Tesla to produce the Model S. So, is Mr. Musk a genius or an impressive man in a unique time and place?

The Point

Elon's texts taught us more? He can't "fix" Twitter. For two weeks in April, he was all in on blockchain Twitter, brainstorming Dogecoin payments for tweets with his brother — i.e., paid speech — while telling Twitter's board he was going to make a hostile tender offer. Kimbal approved. By May, he was over crypto and "laborious blockchain debates." (Mood.)

Elon asked the Twitter CEO for "an update from the Twitter engineering team" No record shows if he got the meeting. It doesn't "fix" Twitter either. And this is Elon's problem. He's a grown-up child with all the toys and no boundaries. His yes-men encourage his most facile thoughts, and shitposts and errant behavior diminish his genius and ours.

Post-Apocalyptic

The universe's titans have a sense of humor.

Every day, we must ask: Who keeps me real? Who will disagree with me? Who will save me from my psychosis, which has brought down so many successful people? Elon Musk doesn't need anyone to jump on a grenade for him; he needs to stop throwing them because one will explode in his hand.

4 Pricey Tools That Are Valuable

I pay based on ROI (return on investment).

If a $20/month tool or $500 online course doubles my return, I'm in.

Investing helps me build wealth.

Canva Pro

I initially refused to pay.

My course content needed updating a few months ago. My Google Docs text looked cleaner and more professional in Canva.

I've used it to:

• product cover pages

• eBook covers

• Product page infographics

See my Google Sheets vs. Canva product page graph.

Google Sheets vs Canva

Yesterday, I used it to make a LinkedIn video thumbnail. It took less than 5 minutes and improved my video.

In 30 hours, the video had 39,000 views.

Here's more.

HypeFury

Hypefury rocks!

It builds my brand as I sleep. What else?

Because I'm traveling this weekend, I planned tweets for 10 days. It took me 80 minutes.

So while I travel or am absent, my content mill keeps producing.

Also I like:

• I can reach hundreds of people thanks to auto-DMs. I utilize it to advertise freebies; for instance, leave an emoji remark to receive my checklist. And they automatically receive a message in their DM.

• Scheduled Retweets: By appearing in a different time zone, they give my tweet a second chance.

It helps me save time and expand my following, so that's my favorite part.

It’s also super neat:

Zoom Pro

My course involves weekly and monthly calls for alumni.

Google Meet isn't great for group calls. The interface isn't great.

Zoom Pro is expensive, and the monthly payments suck, but it's necessary.

It gives my students a smooth experience.

Previously, we'd do 40-minute meetings and then reconvene.

Zoom's free edition limits group calls to 40 minutes.

This wouldn't be a good online course if I paid hundreds of dollars.

So I felt obligated to help.

YouTube Premium

My laptop has an ad blocker.

I bought an iPad recently.

When you're self-employed and work from home, the line between the two blurs. My bed is only 5 steps away!

When I read or watched videos on my laptop, I'd slide into work mode. Only option was to view on phone, which is awkward.

YouTube premium handles it. No more advertisements and I can listen on the move.

3 Expensive Tools That Aren't Valuable

Marketing strategies are sometimes aimed to make you feel you need 38474 cool features when you don’t.

Certain tools are useless.

I found it useless.

Depending on your needs. As a writer and creator, I get no return.

They could for other jobs.

Shield Analytics

It tracks LinkedIn stats, like:

• follower growth

• trend chart for impressions

• Engagement, views, and comment stats for posts

• and much more.

Middle-tier creator costs $12/month.

I got a 25% off coupon but canceled my free trial before writing this. It's not worth the discount.

Why?

LinkedIn provides free analytics. See:

Not thorough and won't show top posts.

I don't need to see my top posts because I love experimenting with writing.

Slack Premium

Slack was my classroom. Slack provided me a premium trial during the prior cohort.

I skipped it.

Sure, voice notes are better than a big paragraph. I didn't require pro features.

Marketing methods sometimes make you think you need 38474 amazing features. Don’t fall for it.

Calendly Pro

This may be worth it if you get many calls.

I avoid calls. During my 9-5, I had too many pointless calls.

I don't need:

• ability to schedule calls for 15, 30, or 60 minutes: I just distribute each link separately.

• I have a Gumroad consultation page with a payment option.

• follow-up emails: I hardly ever make calls, so

• I just use one calendar, therefore I link to various calendars.

I'll admit, the integrations are cool. Not for me.

If you're a coach or consultant, the features may be helpful. Or book meetings.

Conclusion

Investing is spending to make money.

Use my technique — put money in tools that help you make money. This separates it from being an investment instead of an expense.

Try free versions of these tools before buying them since everyone else is.