Doug Colkitt
@0xdoug
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Founder @ambient_finance Founding contributor @fogochain Ex: Quant
Joined August 2021
We made a dex. You should check it out. Ambient is the first and original singleton AMM with hooks, flash accounting, and limit orders. Live on mainnet and ready to use now. Also we're fully and totally open source. Always will be.
Introducing Ambient Finance - a new zero-to-one decentralized trading protocol. Built from the ground up as a single contract, Ambient is faster, easier and cheaper to use than other DEXes, with a user experience rivaling CEXes.
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The entire global financial system to the Bank of Japan right now
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1/ Very rough and speculative sketch of what I increasingly think happened at FTX as more info comes out… . The central question is where did the money go? Yes malfeasance and fraud is necessary, but at one point in the cycle cash actually has to go out the door.
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1/ Finished a preliminary deep dive into the Kyber exploit, and think I now have a pretty good understanding of what happened. This is easily the most complex and carefully engineered smart contract exploit I've ever seen. .
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1/ Zillow made the same mistake that every new quant trader makes early on: Mistaking an adversarial environment for a random one.
Cute fact about the Zillow thing is that even if Zillow's model was more accurate than local agent valuations, local agents/property owners can still win on average because they get to choose which houses to buy/sell.
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Depositors pulling from SVB wasn't the problem. The problem is SVB bought $100 billion of mortgages when yields were 1%. If you think this is just SVB, think of every person you know who locked in a 30 year mortgage at 2.5%. Who do you think was on the other side of that trade?.
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Rumor is Eth 3.0 announcement this week will be a second merge into a new consensus targeting 1 second block times, SSF and native zkEVM. Native zkEVM in particular is huge. The gas limit can be eliminated entirely. Builders can build arbitrarily large blocks, since nodes only.
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Uniswap doing NFTs. dydx becoming a cosmos chain. Solana making a phone. Vitalik becoming a travel blogger. Tune in next week when Cardano opens a chain of barbecue restaurants and Do Kwon joins the cast of SNL.
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So looks like HL force closed the Jelly market and overrode the oracle price (about $0.50) to settle at $0.0095, leaving the attacker with a small loss.
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1/ How to lie with statistics advanced edition. This meta-study claims to overturn the long established pattern that moderate drinkers have lower mortality than abstainers. After adjusting for confounders there was "no significant reduction in mortality". Very misleading.
New huge meta-analysis of alcohol and all-cause mortality.If you're holding a glass of wine tonight and thinking "this is medicine! it's basically carrot juice" you're deluding yourself. While moderate drinking isn't great for you, it's not obviously bad.
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Millennials will lose $8 billion and still refuse to make coffee at home.
PLEASE CONFIRM: A user claims that they spotted Caroline Ellison at Ground Support Coffee on West Broad in SoHo Manhattan at 8:15 AM. This would mean she is not in Hong Kong and is in NY not in custody.
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Hitler is not happy with the state of Ethereum client diversity.
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"You're hiding immutable smart contracts on this validator. Are you not?"
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@ConstitutionDAO . Little alpha leak. There’s a creamery in Wisconsin which makes ice cream that’s Ken’s favorite treat in the world. He regularly gets it helicoptered in to Chicago. I’m willing to bet you could buy that creamery for a lot less than $40 million….
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16/ Imagine a casino where all the games were +EV, except the house doesn’t actually have money to cash out the chips. Nobody would notice because instead of cashing out, they’d just keep pouring bee funds into the money machine. FTX was a ponzi targeting trading firms.
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"Jerry, They hedge the IL"."How do they hedge the IL?"."All these big yield platforms, they hedge the IL". ". You don't even know what a hedge is."."Do you?"."No"."Well, Celsius does and they're the ones hedging it"
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There’s a lot of powerful messages in the new Kendrick Lamar album. But for me the one that stood out is the plea for Powell to pause rate hikes until ETH is back over $3000.
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13/ The hard lessons are unavoidable, but Zillow made the classic follow-on mistake that's the number one differentiator of quant traders that are ngmi:. When the models diverged from reality, they doubled down on the models. Always trust empirical evidence over derived models.
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21/ A ponzi works best you trick the marks into thinking the profits are because of how smart they are. Very few people will ever stop and think “wait, there’s no way I’m smart enough to be making this much money”.
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A consistent theme from 3AC drama is none of the lenders talked to each other (for competitive reasons), so no one realized the size of the exposure. Good opportunity for a credibly neutral ZK protocol. Lenders could compare aggregate exposure without revealing their own numbers.
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1/ IMO there's essentially no way to make the economics of an on-chain order book sustainable. At least in a general purpose chain. IMO the only solution is an order book specific appchain with application aware pricing. A general purpose chain can't profitably host an order book.
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“And what’s the deal with L2s. If the rollup is so much faster and cheaper, why don’t they just make the base layer out of whatever the hell they’re doing on the L2?”
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Congratulations to everyone in crypto for really putting in the effort to improve the tech so much over the weekend.
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“Woah, woah. Hold on, kid. First of all we were just running some highly profitable strategies. Second of all, it ain’t illegal to be smarter than your counterparties. Capiche?”
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2/ At 3AC we knew it went to losses on leveraged long positions. At Lehman it went to bad mortgages. At Enron it went to boondoggle mega projects. Some FTX money obviously went to seed rounds in bad or illiquid projects. But AFAICT nowhere near enough to explain the hole.
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1/ There's a lot of debate and speculation on crypto Twitter about how Alameda managed to lose so much money. But this may give a false impression of ambiguity in other aspects. There's one thing that's unambiguously and indisputably true. SBF and Alameda committed fraud. Period.
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10/ Behind every order is a thinking, breathing shark. A shark with mouths to feed and a mortgage to pay. A shark who's likely smarter than you. Definitely more ruthless. You're swimming in shark-infested waters, treating apex predators like specks of geometric Brownian dust.
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Nasdaq down 3% just because Andre quit DeFi seems a tad overshot to me.
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17/ Crypto trading firms had the illusion they were skilled. Instead all they were doing was winning against the Washington Generals. All of it stops working if Alameda ever turns off the quoter and donating money to the market everyday.
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Being in Ethereum and watching the rollup centric roadmap constantly flounder and pivot on the economics is like being mid air on a charter flight, and mid air the pilot tells you the main airport on the islands been closed and he’s going to land on this new airstrip. And you.
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Give Rushi a break. He was working like a dog every day until noon.
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23/ Normally liqs are easily profitable layups. But if you have mediocre trading systems, a big liquidation with a lot of toxic one way flow in a fast market is bad. Seems likely that Luna pushed them over the edge, not because of prior exposure but just the FTX liquidations.
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12/ Alameda made the mistake of assuming it was operating in a random environment when it in an adversarial ones. But the market is filled with sharks The more you expose money losing behavior in size, the more the market will adapt to exploit you, despite what your sims say.
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Fun fact: Now that there's a liquid priced market, any Goerli ETH you get from a faucet counts as taxable income, and any testnet transaction you send triggers a taxable capital gains event.
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Some criticize meme coin mania as embracing nihilism, and I’m not entirely unsympathetic. But the bigger issue is the government has made it illegal to put value accrual on-chain. Imagine a world where, in 10 minutes, anyone could start a business and issue tokens, granting.
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18/ I believe that’s where “the money went”. Mid-tier trading firms who struggled everywhere else but found FTX highly profitable. They made huge profits, but ironically many have lost even more because it seemed like a money machine, so why not pour even more capital in.
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I’m 100% opposed to turning Ethereum into a data center chain. As I’ve said many times, protocols that don’t run on consumer hardware will not be censorship resistant. But what I am opposed to is using the specter of home staking to oppose any and all changes. The current.
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Almost every American today relies on the Internet as their first source of information on complex topics, such as the law. It's bizarre and dystopian that prosecutors can use your Google searches for legal advice as evidence against you, and flies in the face of the basic.
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I don’t buy the interop thesis at all. Interop that’s “so good you won’t even know which chain you’re on” has been six months away for four years. Fundamentally there’s no way you can interop across multiple consensus as smoothly or easily as you can within a single consensus.
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9/ The real answer isn't "bad luck". It's that, despite what your models say, the market isn't random thermodynamic noise. The market is an ecosystem-- one where everything is trying to kill you all the time.
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1/ It seems pretty likely we’re about to experience a Cambrian explosion of algo stablecoins. It might be a really interesting time to build protocols mimicking CDO instruments from TradFi.
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19/ This coincides with a personal observation that a lot of crypto trading firms that were successful in 2021 seemed like larps that barely knew what they were doing. This made sense in 2017 when it was crypto natives only. Big fish little pond.
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1/ So, I think the surge in Base reverts is entirely driven by sniper bots. And the problem is being made much much worse by a peculiar approach Clanker takes towards seeding liquidity. A simple change in their deployment approach would fix the problem immediately.
Base hit a new all time high of 131 TPS, though it is driven by a rise in reverted transactions related to memecoins. 25% of gas and 53% of transactions were from reverted transactions. How long until Base integrates in Flashbots' rollup-boost to offer revert protection?
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3/ Let’s rewind to 2017/18. Alameda the prop firm is a big fish in a little pond. They’re mediocre traders (there’s a video of SBF bragging about how their quoter latency is down to something like two seconds). But crypto is still a weird asset class that most won’t touch.
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4/ But inefficient markets rarely stay that way. As more actual pros enter the space their alphas are starting to decay to zero. It happens. It’s a self-contained process. You size down and eventually shut off. You don’t lose (much) money, you just stop making money and move on.
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Driving down the highway this morning and saw this. Any idea what could have caused such destruction. 👀💪🚢
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Is cow boarding an unregistered security?. You stake a valuable commodity (cow) to the custody of a third-party farmer, who pools your cows on a node (ranch). You rely on the farmer's skill to protect the asset from slashing and collect a yield (milk) on your behalf.
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@ipopflop @0xMert_ @aeyakovenko @KyleSamani @RobertSagurton Hyperliquid did two things really well which resulted in really deep liquidity (and low slippage which makes for good trader UX). Cancels always get sequenced before trades, and the HLP vault has a structural advantage in the book (at least as far as I can tell). This meant.
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Sequoia invested in FTX so FTX could lend money to Alameda so Alameda could invest in Voyager so Voyager could lend money to FTX so FTX could invest in Solana Foundation so Solana Foundation could invest in FTX so FTX could lend money to Nishad so Nishad could invest in Sequoia.
The $5.4 billion Alameda VC portfolio revealed by the Financial Times
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7/ Sam has now turned a -EV trading strategy into an exchange valued at tens of billions based off growth metrics being basically generated by Alameda itself. Riding off nosebleed valuations and VC demand for crypto tech exposure.
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5/ I think at this point Alameda hatches a much more audacious exit plan. (Linear utility is a hell of a drug.). The prop trading operation as an independent entity won’t survive. But it’s liquidity can be used to bootstrap a lucrative consumer facing crypto exchange.
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9/ Instead of losing a little money trading every day, they’re losing a lot. But unlike an independent prop firm that would just turn off the quoter, they can’t get off the bus. FTX valuations are dependent on Alameda liquidity. And Alameda liquidity is burning money.
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20/ But how can all these crypto native firms make money now that we know the most sophisticated and skilled TradFi HFT firms are in the game?. The answer seems to be that Alameda was a giant money faucet.
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“Yeah, there was a reorg in the middle of the Goerli merge. Network couldn’t reach finality. Eth is fucked for sure”
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1/ Why I'm not interested in price oracle AMMs as a long-term solution. (Even if they may be the right approach. ) . 🧵.
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BitTorrent survived and even thrived in a hostile adversarial legal regime because it was possible to run nodes on consumer hardware and Internet connections. If BitTorrent was a data center protocol, it would not be around today.
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Rob reached out early in the Fogo journey, and it was clear he was on to something big: Build a pure firedancer network with multi-local consensus to achieve performance not possible in any chain today. It was also clear he was putting together a cracked group of contributors to.
You think you’re early on some thinking and then you see that somebody tweeted about it months before! This was the case when I came across the below tweet from Doug Colkitt. A cold DM and an overview of the Fogo plans and @0xdoug quickly got it. I’ve met a number of giga.
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The plan? . Initialize the commit root to 0x0, so that hundreds of CT posters are FOMO'd into committing a federal felony using a doxxed wallet.
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10/ Supporting. Price discovery was almost entirely dominated by Binance, implying FTX liquidity was getting picked off left and right. Two, trading firms made a killing in 2021, implying someone was on the other side.
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1/ Been thinking about value accrual models for L1 tokens…. An L1 is essentially a business that sells the product of blockspace. For investors trying to value L1 tokens, the question is how much value can the chain extract from consumer demand for that blockspace.
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15/ But crossing this rubicon was the point of no return. If Alameda ever stopped running the quoter, FTX liquidity would collapse, people would pull reserves (if not just because the easy alpha would disappear). No matter how much Alameda loses, FTX has to keep supplying it.
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1/ You used to know as Crocswap. Now we're @ambient_finance and live on Ethereum (more chains soon). A quick intro to what we've built and where we're going.
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1/ Why the Ropsten TTD attack is not feasible for the Merge on Ethereum mainnet.
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To the extent that all the other regional banks that gorged on agency MBS are able to survive, it will only be because they're able to retain enough depositors in zero interest checking accounts. There's no other way to keep financing 3% HTM loans when short rates are 5%.
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Of the top 10 highest value accruing protocols, 8 are app layer. Only 2 are chains. And besides Eth, the other is the almost entirely ignored BSC. Everyone assumes the alt-L1 trade comes roaring back next bull cycle. But the fundamentals look weak. Especially next to DeFi tokens
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1/ Fascinating little phenomenon happening in the Uniswap UST/USDC pool right now. The price in the pool is basically "stuck" at $0.952, despite the actual market price being $0.93.
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Builders should consider that the US dollar is probably the worse major currency for an algostable. The dollar is the world’s pre-eminent flight to quality asset. Which means the peg is most expensive to defend precisely during market turmoil, when you most likely need to.
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Off the wall prediction: Walmart will issue a stablecoin. It can skirt a lot of regulation, by calling WUSD an on-chain gift card. At $600b revenue, there's enough demand to keep the peg. For years, Walmart has sought ways to provide banking services to underbanked customers.
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If custodial staking is a security, why is real estate property management not a security? . A third party is tending towards a valuable (non-security) asset on your behalf in a way that maximizes value accrual to the asset. Why isn’t fine art restoration a security?.
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Are you really going to fade DeFi, when dexes are processing 500 quadrillion dollars in daily volume, and growing 27 million percent?
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8/ This is the biggest shock for the legions of PhDs that will try their luck at the quant market casino. It's why so many otherwise brilliant people end up washing out. Quant trading often feels like the universe is literally conspiring against you.
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Lotta people laughing at the few of still in crypto. They won’t be laughing when one single Bitcoin will be enough to pay an entire months rent.
Crypto is so fucking lame it’s insane.
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Is a classic car show an unregistered security?. The event organizer takes custody of valuable assets (classic cars) from individual owners. The assets are pooled together to generate revenue, paying out a fraction to car stakers. Stakers trust the organizer to safeguard the cars.
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14/ At one point or another Alameda lost more than it could internally fund. At that point it had to dip into FTX reserves. This probably seemed innocuous at first. After all SBF, on paper was worth near $100bn between FTX and Solana at peak market cap. What’s a few million USD.
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8/ At this point, nothing here is terrible. Plenty of businesses run a loss leader type strategy to generate growth. Where I believe this goes off the rails is that Alameda’s strats become a lot more -EV harder or faster than they anticipated.
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Nasdaq market cap in 2000 was 74% of American GDP. Peak crypto market cap was 3% of global GDP. People comparing the crypto crash to the dot-com bubble are truly under-appreciating how huge the dot-com bubble was—- and why the hangover was so long.
March 2000 - Nasdaq hits an all time high and then the dotcom bubble bursts. It then took around 15 years, until July of 2015, for the Nasdaq to set a new all time high. This is the reality that crypto is now facing. Buckle up.
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1/ Been thinking a lot about the relationship between web2 and web3. Feels a lot like the first vs. second industrial revolutions. The second industrial revolution wasn't successful because it rejected the first. It was a force multiplier on stacked *on top* of the first.
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2/ I know exactly how the conversation at Zillow went, because I've seen it play at dozens of desks across banks, funds, and prop firms everywhere:. "Our model is capturing X% of the variance. With large enough N, the remaining noise will wash out. We now have real edge. 🥂".
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26/ And that's because the "reach quantity" was the upper bound for reaching the tick boundary was calculated as . 22080000, whereas the exploiter set a swap quantity of . 220799999. That shows just how carefully engineered this exploit was. The check failed by <0.00000000001%
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1/ A lot of quant traders (including myself at many times) have a knee jerk instinct to believe that if a strategy is technically challenging it must mean there’s more alpha underneath.
I went to school for math. I got trained in quant trading, and eventually shifted to quant trading in crypto. Over time, I've relied less on math and more on intuition, e.g. for analyzing Elon's tweets. Yesterday I looked at . cartoons? for 4 hours. A thread about adapting.
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Man, if I was the UAE govt the only way I think to possibly save face would be to use my sovereign wealth fund to bid massive amounts of BTC and ETH.
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@alz_zyd_ If you can find an archive of the NuclearPhynance forums, there was a really good long running thread there about RennTech. Most of the general consensus was around:. 1) They’re not really playing HFT games. You can see that they don’t have a footprint in things you’d expect HFTs.
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13/ I think most of the Solana sphere was basically Alameda’s DeFi version of the same strategy. And why they were funding every Solana project that came along like drunken sailors. Flood -EV liquidity and trading across the chain to pump your massive SOL alloc.
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The Big Short ruined an entire generation of traders. who walked out of that theater learning to always bet the farm on a single trade, and never revise the thesis no matter what the market does. It all makes for a great heroic narrative, but good traders are almost never heroes.
And, is it just me, or is getting absolutely balls long a concentrated hugely negative-carry bet written and marked my a more powerful counterparty, essentially a masterclass in how NOT to trade?.
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Everytime a crypto VC drops a little think piece on the TL about memecoins:
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One under-appreciated consequence of this week is that it may have cemented long-term EVM dominance.
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A lot of people assume FTX achieved major retail penetration. But search indicates near zero organic engagement for an exchange its size. FTX seemed dominated by prosumers and trading firms. And if they made a killing in 2021, and there was no soft retail flow, who was losing?
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12/ You really just have to build up an intuition for the adversarial. Once you do it becomes second nature. "Oh of course if we show too much size based on orthogonal signals, everyone's going to dump their toxic inventory on us. Duh!".
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Interesting how you can pretty much see any major news event footprint in Etherscan just by noticing that beaver builds all the blocks for a couple minutes straight
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11/ Three, trading firms seem to be disproportionately exposed to FTX losses. Implying that a lot of those halcyon trading firm profits were occurring at that venue.
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11/ Every quant goes through this. And I can tell you that eventually it gets better. But you have to survive until you've internalized the lessons. The idealized mechanical models that physics and math programs teach don't mentally prepare you for adversarial environments.
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1/ The economics of BSC are really interesting. Anyone trying to build meaningful value accrual in an L1/L2should pay attention. Yes, BSC fills up a lot of blockspace. (About double Ethereum and the rollups combined) But IMO the key driver of BSC is the high floor price for gas.
A swap on BSC is 5x more expensive than Arbitrum One rn. Yet, BSC has 10x the activity. BSC has established clear network effects, particularly in eastern markets, and rollup teams have to up their marketing game significantly to outcompete BSC - their stiffest competition.
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One conclusion you could reach from the stETH fiasco is that the broader ecosystem needs to move away from stableswap/Curve. Markets are tools for price discovery. When you hardcode the price inside the market mechanism itself, it kind of defeats the purpose.
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In less than 24 hours Ambient X Blast has deeper liquidity for ETH/USD than Uniswap X Optimism
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6/ The conviction is probably reinforced by rising tech valuations of and the falling multiples on trading firms around 2019. Alameda will continue as a market maker, but instead move liquidity to its own exchange. Why make another CEX owner rich on the back of your trading?.
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