I've been keeping an eye on the peg rate of Bedrock's uni voucher for three months, and I'm feeling less and less confident.
The core of BR's new staking mechanism is the uniXXX voucher. You deposit a mainstream asset and get a derivative voucher in return. Theoretically, this voucher should peg 1:1 with the underlying asset. But after three months of watching on-chain, I've realized it's not that straightforward. @Bedrock
Sometimes, the price of uniETH dips to 0.998 compared to the underlying asset, and sometimes even to 0.995. A few basis points might not sound like much, but it happens frequently. What really gets me anxious is when the market is volatile, that discount can widen to over 1%. Bedrock explains it as "temporary market imbalance, and arbitrageurs will quickly bring it back." But what I've observed is that after a discount appears, sometimes it takes hours to recover. Where do all those so-called arbitrageurs go?
Eventually, I figured it out. The liquidity of the uni voucher just isn't deep enough. Arbitrageurs can't move the market if they don't have enough counterparties. Bedrock itself doesn't promise rigid repayment and won't use treasury funds to prop up the price. With discounts sitting there, users either have to take a loss and exit or hold on indefinitely, not knowing when that will be. This isn't decentralized finance; it's decentralized anxiety.
To make matters worse, if you want to use the uni voucher as collateral in external protocols, do they value it at face value or market price? Most protocols go by market price, which means that discounted price. When you deposit, the underlying asset is worth ten thousand, but the voucher you receive is only recognized at nine thousand eight due to the discount. After staking for a while, the asset value takes a hit. What kind of appreciation is that?
BR's price is tied to Bedrock's total locked value, but no one knows how much of that value comes from users being forced to accept discounted locking. If one day the market panics and everyone demands to exit simultaneously, the discount on the uni voucher could crash to unimaginable levels. At that point, how much of the underlying asset can you get back for those vouchers? I don't even want to think about it.
I'm not going to mindlessly hype BR just because of this creator event. I'll consider putting my money in once the peg rate of the uni voucher stabilizes above 0.999. Right now, with all this fluctuating discount, it's exhausting to hold on. #bedrock $BR
The core of BR's new staking mechanism is the uniXXX voucher. You deposit a mainstream asset and get a derivative voucher in return. Theoretically, this voucher should peg 1:1 with the underlying asset. But after three months of watching on-chain, I've realized it's not that straightforward. @Bedrock
Sometimes, the price of uniETH dips to 0.998 compared to the underlying asset, and sometimes even to 0.995. A few basis points might not sound like much, but it happens frequently. What really gets me anxious is when the market is volatile, that discount can widen to over 1%. Bedrock explains it as "temporary market imbalance, and arbitrageurs will quickly bring it back." But what I've observed is that after a discount appears, sometimes it takes hours to recover. Where do all those so-called arbitrageurs go?
Eventually, I figured it out. The liquidity of the uni voucher just isn't deep enough. Arbitrageurs can't move the market if they don't have enough counterparties. Bedrock itself doesn't promise rigid repayment and won't use treasury funds to prop up the price. With discounts sitting there, users either have to take a loss and exit or hold on indefinitely, not knowing when that will be. This isn't decentralized finance; it's decentralized anxiety.
To make matters worse, if you want to use the uni voucher as collateral in external protocols, do they value it at face value or market price? Most protocols go by market price, which means that discounted price. When you deposit, the underlying asset is worth ten thousand, but the voucher you receive is only recognized at nine thousand eight due to the discount. After staking for a while, the asset value takes a hit. What kind of appreciation is that?
BR's price is tied to Bedrock's total locked value, but no one knows how much of that value comes from users being forced to accept discounted locking. If one day the market panics and everyone demands to exit simultaneously, the discount on the uni voucher could crash to unimaginable levels. At that point, how much of the underlying asset can you get back for those vouchers? I don't even want to think about it.
I'm not going to mindlessly hype BR just because of this creator event. I'll consider putting my money in once the peg rate of the uni voucher stabilizes above 0.999. Right now, with all this fluctuating discount, it's exhausting to hold on. #bedrock $BR