Unchained - In the Recent Crypto Market Meltdown, What Role Did Lido's stETH Play? - Ep. 370

Episode Date: July 5, 2022

Hasu, strategic advisor to Lido, and Tarun Chitra, founder of Gauntlet, explain everything about staked ETH, aka stETH, how it should be priced, Lido’s market dominance, and much more. Show highlights: the role of Lido, what stETH is, and what its benefits are whether Ethereum’s lack of delegated proof of stake contributes to the need for stETH why stETH is not mispriced and why it doesn’t necessarily have to be worth 1 ETH the inherent risks associated with stETH how there was not enough liquidity to handle all the liquidations, especially in automated vaults on, for instance, Instadapp  how automated market makers work and what Curve’s amplification factor is whether 3AC and Celsius had a significant impact on the stETH/ETH “de-peg” how does the Merge affect the liquidity of stETH Hasu’s and Tarun’s level of confidence that the Merge will happen this year and whether it will be a success what will happen to the price of stETH after the redemptions are enabled why Lido has achieved such a level of dominance how Lido decreases the cost of staking and helps improve the security of the Ethereum blockchain whether there is going to be a “winner take all” in the liquid staking derivatives market how liquidity fragmentation can cause the system to blow up why LDO tokenholders might not have the same incentives as ETH tokenholders what is Lido’s new dual governance model and what is it trying to achieve whether Lido should self limit its market dominance how Lido coordinates validators and the role of the LDO token in this coordination what are the lessons to be learned from the stETH situation how governance is a liability to DeFi protocols   Thank you to our sponsors!   Crypto.com: https://crypto.onelink.me/J9Lg/unconfirmedcardearnfeb2021 Ava Labs: https://www.avax.network/ Oasis: https://oasisprotocol.org/grant-programs?utm_source=unchained&utm_medium=partnership&utm_campaign=podcast-oasis-grants-program   EPISODE LINKS   Hasu:  Twitter: https://twitter.com/hasufl Uncommon Core Podcast: http://uncommoncore.co/podcast/ Tarun:  Twitter: https://twitter.com/tarunchitra   stETH   Lido’s explanation: https://twitter.com/LidoFinance/status/1535184472546889735?s=20&t=oQeB1uj7HG7Y4he-0gbcLg Lido’s explanation #2: https://twitter.com/LidoFinance/status/1536756933054676992?s=20&t=oQeB1uj7HG7Y4he-0gbcLg Hasu’s thread #1: https://twitter.com/hasufl/status/1524717773959700481?s=20&t=oQeB1uj7HG7Y4he-0gbcLg Hasu’s thread #2: https://twitter.com/hasufl/status/1525427069198508033?s=20&t=oQeB1uj7HG7Y4he-0gbcLg Tarun’s take: https://twitter.com/tarunchitra/status/1538775828573609985?s=20&t=oQeB1uj7HG7Y4he-0gbcLg Tarun’s paper: Why Stake when you can borrow: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3629988   Lido Self-limit?: https://twitter.com/LidoFinance/status/1540258690942615555?s=20&t=sJU5C5xo5litEJrZZDaWNQ Hasu on Lido’s dual governance proposal: https://twitter.com/hasufl/status/1540652075352313857?s=20&t=sJU5C5xo5litEJrZZDaWNQ Lido’s two phase voting scheme :https://blog.lido.fi/moving-to-two-phase-voting/ Previous Unchained Coverage on DAO governance: Solend and Bancor Drama: Did These DAOs Violate the Ethos of Crypto?: https://unchainedpodcast.com/solend-and-bancor-drama-did-these-daos-violate-the-ethos-of-crypto-ep-366/ Learn more about your ad choices. Visit megaphone.fm/adchoices

Hi everyone. Welcome to Unchained, your no-hype resource for all things crypto. I'm your host, Laura Shin, author of The Cryptopians. I started covering crypto seven years ago, and as a senior editor at Forbes was the first mainstream media reporter to cover cryptocurrency full-time. NFT marketplaces are entering the mainstream. eBay recently announced an acquisition of known origin and Uniswap is acquiring marketplace aggregator Jeannie. I recently sat down with Jacob Horne and D. Goans, founders at the NFT. Marketplace Protocol, Zora, to talk about the benefits of having a decentralized marketplace protocol. Subscribe to my premium bulletin newsletter to watch. You can subscribe at laura shinn.bulleton.com slash subscribe. Oasis Network is one of the fastest growing layer one blockchains designed to support privacy, speed, and scalability in Web 3. Learn more and join the community at oasis protocol.org. harness the full power of the avalanche network with Core, your new,

Web 3 Command Center. Built by Aval Labs, Core is more than just a wallet. It's a non-custodial browser extension, engineered for users to seamlessly and securely experience Web3 like never before. Explore Avalanche DAPs, NFTs, bridges, subnets, and more today. With the Crypto.com app, you can buy, earn, and spend crypto in one place. Download and get $25 with the code, Laura, link in the description. Today's topic is Staked Eith. My guests are Hasu, strategy lead at FlashBots, and Strategic Advisor to Lido, and Turun Chitra, founder of Gauntlet. Welcome, Haseu and Tarun.

Hey, Laura and Tarun. Nice to meet you. Thanks for having me. Hey, great to be back. This is actually going to be the first and two-part series on StakedEth or Steeth slash Lido, since there are a couple of big issues regarding it that I felt should be separated out into their own shows. Today's show mostly focuses on Steeth's role in recent events, such as those involving Celsius and Three Arrows, that we also get into issues with Lido's power and proposals to address that. Tarun and Hasu, before we dive into some of these recent issues around Steve, let's make sure people understand what it even is and why people have been wanting it,

meaning what it is they do with it. So, Hasu, why don't you start with a description? Sure. So staking in its native form on Ethereum has a few problems. So for one, there's operational complexity. Users want to stake the EVE, but not run the hardware, misstatations, get slashed, etc. Then there's the cost. Staking is only possible in multiples of 32EF.

And even in the bear market, that's still a lot of money for a lot of people, that they might not have lying around. And the third problem is liquidity. So if you stake, you have to lock up your capital and cannot use it in DFI at the same time. And this is a problem, especially because the beacon chain right now is a one-way street. So people can only stake, but they cannot unstake. And unstaking is only becoming available in the update after the merge, which is called Capella, and that's expected to be around eight to nine months out. So Lido is a decentralized liquid staking protocol.

and it works the following way. So users give the EVE to Lido, and then Lido gives it to one of 29 professional node operators who stake it on their behalf. Lido issues the user as a token that represents the stake on the beacon chain. And this token is called Stake Eve. After withdrawals from the beacon chain are enabled, from that point on, users can take one staked Eve and redeem it for one EVE.

And the reason that this token is so useful, and Lido has been very popular to date is that this Staked Eve is like a somewhat sort of inferior form of Eve itself. It's like a token that people can use to represent their stake and you can use it in Defi. They can trade out of it, which wouldn't be possible otherwise, and they can collateralize it in landing markets like Avey or MakerDAO. So in many ways, users have found this to be better than running their own hardware and staking directly. Yeah, and just to be clear, oftentimes when they get the staked eith, they deposit to AVE. In order to borrow more ETH, stake that, and then get more steeth, et cetera. So one question that I wanted to ask here is, you know, we were talking about how part of the

reason for this is because people want to be able to have liquidity on the ether that they stake. And I was just wondering also, because there are other systems that use delegated proof of stake, does Ethereum's lack of delegated proof of stake contribute to the need for steak, Heath, or is that not the case? Yeah, I mean, I think one important piece to remember about this is that there's sort of a philosophical bias in the Ethereum 2 community against any form of delegation. I think the long-term goal of that research community was to have sort of a one-person, one-node type of version of the world, where everyone was running their own validator, they had their own keys. Of course, I think in practice, things got much more complicated. And we started to observe basically exchanges offering sort of stake-death products, like centralized exchanges like finance and Coinbase.

where basically if you left Ethereum on exchange, then they would delegate it and run a validator and give you some or most of the yield. And I think effectively Lido wanted to make a decentralized version of that possible. And of course, there's multiple versions of staking derivatives now, but Lido has sort of the dominant market share. If we look right now, it's like a little over 90% of staking derivatives are in Lido.

But I think one of the main things was exchanges started to aggregate this power, and it became clear that there needed to be some sort of decentralized alternative, and the decentralized alternatives main value proposition over the centralized version was that you could use it in defy in different ways. And so I think that the genesis does sort of stem from that, and that is sort of, you know, I think one of the reasons it is effectively an indirect form of delegation, it boils down to the sort of philosophical divide amongst Ethereum 2 researchers towards whether to have delegation or not.

Yeah, and I guess since Ethereum doesn't really have governance, maybe even delegated proof of stake wouldn't even make sense. Let's now talk about the reason why Steve has been in the news so much. One of the main issues is that people feel that Steve has been mispriced. For much of its lifetime, the price of Steve, has basically been the same as the price of Eiff, sometimes maybe a little bit less, like 0.99 or 0.98th. But once the issues with Terra began a little over a month ago, then it began falling a little bit. And then once the problems with Celsius and 3 arrows kicked off, it really took a dive.

And now it's at more kind of like 0.94 or 0.95 Eath. Why do you think that is? For one, I think we can say that state Eif has not been mispriced to date. And I can give an explanation for that. So one staked eath, as we said, can be redeemed for one eith when the withdrawals become available. And sort of this is what we would call the primary market exchange rate. And then what you described sort of is the secondary market exchange rate, the price at which state defaulters can can sell it before withdrawals become enabled. And so staked eph is a rebasing asset.

That's something we should also mention. So meaning its balance goes up over time. So if the staking yield were 5%, then after one year of holding staked Eve, then you would have in your account 1.05 staked Eve. And then you can use it and redeem it for 1.05 Eve. So if withdrawals were enabled today, then I think we could straightforwardly say that one stake Eve must always be worth one Eve, right? Because there's like a no arbitrage condition. like if it were like more valuable then people would sort of create more steak,

even sell it and if it were less valuable than people would withdraw the even and sell that instead. So but they would always be arbitraged towards a price of one. So now, but this is not yet possible to withdraw. So instead we have several market forces acting on this exchange rate between steak even if. And the biggest one is. is sort of the fact that it is a yield-bearing asset. And this is sort of a market force that pushes Staked-Eve to trade above EVE. Why?

Because if you stake it today, then you can redeem it for more in the future. So that's one reason for Stake-Eaf to trade above one EVE. And then you have a couple of reasons why it should trade below one EVE. And that's sort of there's risk inherent to LIDO, mainly technical risk and governance risk. and then you have risk inherent to Ethereum and the merge. So whether they can execute it on the timeline that we all expect. And finally, you have liquidity risk. So that sort of you need to sell your staked eve at any time before withdrawals become available.

But sort of the price is somewhere where you have to sell it at a discount. And depending on the current market conditions, sort of these market forces are stronger or weaker than one. another. So before sort of the recent market downturn, stake-eaf has indeed be trading at one-eif. Why? Because investors were sort of favoring this yield that they could get from staking more than the risks and especially sort of this cost of liquidity. And then the market turned and all of a sudden this is what always happens when in every market, sort of when there's a downturn, investors and market participants really start to favor liquidity, right? They want to be in the most liquid assets where they can be the safest and they can sort of sit out the storm and react to any market conditions. And so I would say this paired with, you already alluded to it, but a lot of forced selling from parties that were also owning steak even got liquidated. So this then sort of caused, yeah, basically selling from steak, if into even sort of push the price downward. But that doesn't mean. that it was mispriced before. In fact, you can sort of easily see why that's not the case,

because if Stake Eve, and this is what some people argue, should always trade below one if, then anyone who would want to join the beacon chain and start staking should always buy stake if on the market and stake that way and never stake directly. But if they did that, then they would just arbitrage the price of Stake Eve until it is one if again. So we can see basically whenever there's access demand to join the beacon chain, then the two should be exactly priced one to one. And when then there's sort of a drop in demand to stake and people, for example, favor liquidity or the risk goes up of EF2 or of Lido, then you have these other market forces that push it down. And there's no way to arbitrage it back up because withdrawals are not

yet enabled. So in a nutshell, that would be my explanation for how steak Eve trades against Eve in various market conditions. Turin, do you agree with that? I think that's sort of like the correct maybe like zeroth order or first order model. There's some second order effects, which actually were kind of the scary part slash why I didn't sleep for a lot of days. And it was pushing all these, you know, we at Gauntler were pushing a lot of governance proposals to try to scare people until reducing their leverage. But basically, I think while that is true in sort of this idealized case of like really high liquidity, this indirect way of kind of closing the arbitrage loop, a lot of people who were participating in this market were mainly participating

in a quite over levered way. So there were certainly like a few sort of people who offered vaults where you could deposit eath and they would go basically mint steak eth, borrow eth against a steak eth and recourse that a certain amount of times. And they sort of hard-coded a lot of their assumptions about like how much leverage is okay. So if you think the price is always at one or very close to one, then you could basically say, hey, I can like take a lot of leverage. If you think it actually has some volatility and might actually go down to 0.94, you might say, okay, maybe I'll only take two X leverage. Now, the problem with some of these vaults and the one that was the scariest and was the

closest to having the most cascading liquidation failures of when three arrows made that 30,000 stake teeth fail was Instadap. And so Instadap has this fault that basically was a little bit reckless with how it provide how much leverage it allowed people to take because it really basically made this assumption that stake. Steak Theth to Eath would like never go below 0.97. And I mean, there was this moment right after the Staked Heath to the three arrow steak teeth trade where the net liquidity for selling steak teeth. So if there's a liquidation, someone will basically buy the steak teeth collateral from

Ave and then sell it somewhere. And steak teeth's dominant liquidity is on chain. And it's mainly in Curve, there is a bit in Uniswap. Most of that comes due to a combination of like how incentives are constructed and, you know, where the Lido governance token and the Curve governance tokens are sort of provided as incentives. And there was a really crazy point where like basically there wasn't enough liquidity in the curve pool to handle all of the liquidations. If you had this thing where Insidap got liquidated and right below Instadap, that basically

if you assume the liquidator immediately sells all the Instadap positions, they basically trigger sort of a cascade of like some other positions now. Like the price goes down, say it was at 0.94, the Insidap gets liquidated. When it gets liquidated, they sell it on curve. And the price goes down to 0.93. And then when it's at 0.93, there's some other loans in AVE that get liquidated. And there was definitely a huge contagion risk there.

And most of that had to do with the fact that the market's belief in this kind of low volatility of this price meant that people over-leverage themselves. And some of the reason this liquidity risk got priced incorrectly to some extent was basically because people weren't accounting for the fact that the amount of leverage being used was really high. And I think that impact obviously has stuck with the minds of people who are purchasing state fees, which is why kind of has not been, I mean, there's a lot of bids from 0.93 up nowadays, but it doesn't seem like there's definitely people realize that there are these extremely scary automated vault strategies that basically are quite reckless and the end users, I think, don't realize that they're kind of

in this sort of precarious position. Yeah. Yeah, I would imagine that plus the general macro environment And altogether just suddenly has everybody sort of pulling up the driverages and being like, oh, you know, I'm not going to do these risky things. JR on Twitter asked, was stable swap or steep slash ETH curve, ETH curve pool, a good automated marker maker choice for an asset that, quote unquote, shouldn't trade one to one. So I'm not sure how this curve full, how it was set up, but like, was it something where the assumptions were that it would always be one to one?

or? So, I mean, it does assume you're sort of mean reverting around some point. So it's an automated market maker that's a curve is sort of, I think the simplest way I think about it is there's the two most simple types of automated market makers are one, which is sort of a constant price. So people put in reserves of asset A and asset B. And you say, hey, asset B always costs five units of asset A. and then basically people can buy until, you know, there's only asset A left or only asset B left.

And that's sort of a linear automated market maker. It's not, it gives you a fixed price. You have no price impact. And it's good for things that should be kept at roughly a constant price. On the other hand, you have something like Uniswap, where you have this sort of constant product type of formula. And a constant product formula, the price is based on the ratio of the ratio of the, amount of reserves in the pool. So like on each trade, the reserves are going, you know, one side of the reserves are gaining, the one that's sort of more less in demand and the one that's

depleting is one that's more in demand. And curve is sort of an average of the two of them. It combines this very flat, doesn't move the price, at least within some range piece, and then moves the price a lot when you're outside. Effectively, I think that there is, to some extent, some bias and curve towards kind of staying near the center point. However, some of the trade sizes we saw were large enough that I think we got outside of the kind of flat region. So there's a parameter in the curve system called an amplification factor, which controls effectively. How big does the trade have to be until the price starts moving really fast? And I think that was actually being monitored and to some extent adjusted,

probably not as frequently as it should have been. Long-term short is, I think you could imagine if curves amplification factor was adjusted more frequently and the incentives were adjusted, it could have been fine.

I think it just, things sort of happened quite fast. And I'm not, I wouldn't make the argument that uniswap v3 would be better for sure, because you would have to still have people constantly adjusting the ranges in uniswap v3. And in a kind of crisis time, if no one actually does that in time, then like someone makes a trade and then there's no liquidity on the other side.

So I think like there's the dialectic here is there's not really one best design here. It's better to actually have many different AMMs being providing liquidity. And it's just that in the case of why it mainly was curve. Yeah. Yeah. So I think I would like to connect a few dots here. So from Turin's previous answer, so you made a very good point, which is that sort of the pricing model that sort of I laid out for like Stake D versus Eve is correct, but it wasn't the pricing

model that the whole market used. And it's very important that sort of people understand why a certain asset should like trades a certain way and how it should trade under certain market conditions, right? Because otherwise they just make financial decisions that could be bad for them or in the case of cascading liquidations be bad or the entire ecosystem. That's the first dot. And the second is sort of Lido has been incentivizing liquidity around certain price points or like putting incentives on certain pools. Why?

They did this in order to provide this service for Stake EF holders to, you know, have the liquidity and sell their EF when they want to, right? So they want to ensure that there's a liquid market. And then the second dot is the right curve design. So the goal of the perfect pricing curve is basically to predict where the market maker in that case should be deploying liquidity, right? At what price points they should sort of reserve and put their inventory and sort of make it available for sale. And so I think what all of this fits together is basically that the curve pool hasn't been, you know, as good as sort of reacting to when the market conditions changed,

according to the pricing model. And the fair price for stake EVE was starting to be sort of below one. And so I think a different, like using a more flexible AMM, such as UNICEOP3, I think would have made it easier to sort of just shift where prices should be quoted because what LIGO should in fact do is not incentivize liquidity at the pack. they should incentivize liquidity at whatever is the fair market price at the time. At least that's my view. Because I think that's where they get sort of the most, yeah, liquidity for their value, right?

Because if they were deploying it below the market price, then it wouldn't be very effective for anyone who needs that liquidity right now. And if they were deploying it above the fair point, then it could be arbitrage down to what the fair price is. So I think they are always incentivized to maximize liquidity around what the current fare prices. And in order for that, using the right AMM and the right curve design is very important. Earlier, we were talking about how we had all these cascading liquidations, especially exacerbated by some of these automated vaults, like by Instadap and stuff. And I just, you know, sort of need to address one of the elephants in the room,

which is that Haso, you host a podcast with Sujou, one of the partners behind Three Aeros. capital. So I don't know if there's anything you can either reveal about that situation and its effect on the market or your relationship to 3 AC or anything like that. So like everyone else, I learned about the three errors situation from the media. I haven't talked to Sue since. Yeah. So I think if I had to guess like the connection to this is that both three errors and Celsius were both large owners of steak if, like as well, as well, were many others, but I don't think it contributed in any way. So the stake Eve price deviating from one contributed in any way to how all of this played out. If anything, I think sort of the causality

here is reversed because both Celsius and three arrows became large sellers of steak Eve. And as Theron was pointing out earlier, they had to sell several hundred thousand steak Eve into the market. So that would be my take on the situation. But I don't understand. I thought wouldn't that then lower the price of Steve? So why is it that you don't think that that contributed to not being? Oh, so I'm saying that the reason that the price declined was in part due to their forced

selling. Oh, you're right. Yeah. Okay. For some reason I misheard you and I thought you said it the opposite way. So obviously we don't really quite. know the full state of everything now with either of those companies, but assuming that they both still have some staked ETH, then do you imagine it's more likely that they might be forced to sell

even more of it to try to recover some liquidity for their users or LPs? And then, you know, are we basically looking at another potential depression of the price in the near future? I don't know if they have any more steak, if I haven't been following the situation. June, do you know? I think some of their wallets have a little bit, but nowhere near as much as the Sunday, June 12th, that was like the kind of crazy,

like in 4 a.m., roughly Eastern time. That was like when that huge sale happened. And then there was just a ton of bots trading right after that. What I heard about three arrows as well is that they are entirely out of liquid assets. And so steak leave would be a liquid asset. And sort of illiquid assets would be investments that they're made that are somehow locked up or subject to vesting schedules. So I don't think steak leave would be affected by that. And what about Celsius?

They do still have some steak thief, but mainly because a lot of it is locked up as collateral. Their strategies, at least the ones that we've spent time in, like, they don't, they don't just lever on, lever up on steak to eth directly. They borrow stable coins and they borrow other assets. That was why they were quite close to being liquidated actually, because the ETH price drop was more deadly to them than the Staked Eth ratio, because they borrowed a lot of stable coins and farmed in other places. So Celsius was a little more, ironically, probably less systemic risk to Steak Heath itself, but like more. systemic risk to the overall like all defy protocols whereas i think the three arrows and sort of

insidap vaults were very like concentrated in the steak teeth type of thing but yeah i mean i mean celsius was really farming anything and everything that had i i had not heard of some of these protocols that they were they were putting their capital putting their users capital in i guess oh dear oh dear okay so in a moment we're going to talk about a whole host of other related issues, starting with the merge. But first, a quick word from the sponsors who make this show possible. OASIS aims to offer improved privacy and scalability compared to other existing blockchains. They feature 99% lower gas fees versus Ethereum, high throughput, instant finality, and defense against MEV, making it ideal for decentralized applications. OASIS invites prominent Web3 developers to apply for its grants program,

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and convenient Web3 experience. Download the free Core browser extension from Google Chrome's App Store today. Back to my conversation with Hasu and Turun. Okay, so as we were discussing earlier, once the merge happens, that's actually not going to, you know, immediately affect the liquidity of Steath. I think you said it will still be locked up for like eight or nine months. Yeah, so I think that the hard fork that would enable withdrawal is scheduled to be around six months after the merge. So basically it's time to the merge plus six months.

and most people are estimating that to be around eight to nine months. Okay, so let's talk a little bit about how uncertainty about the merge has also been affecting either the price of Steeth or just some of these issues that we're seeing. This is like a quick lightning run. What's your level of confidence that the merge will happen in the next few months? I would say like 70% that it happens by October. I'm perhaps more pessimistic. I actually think it will be early next year, not this year. Okay.

And for both of you, what's the level of confidence that you have that the merge will go smoothly? I think pretty high. If they do decide to go through with it, then I think the amount of testing that we're seeing and the amount of preparation will make me pretty confident that I think it can get the light as Tuna is saying, but I think if they do go through with it, then it will most likely go smoothly. And so on a range of 1 to 10, 10 being extremely confident, one being not confident, how confident are you that it will go smoothly? 7 to 8.

I'm somewhat more pessimistic also. One thing I do think is maybe being underweighted probability-wise is just like the fact that miners really enjoy keeping the POW fork alive, like keeping the current chain alive, removing the difficulty bomb and just continue mining on the existing chain. I know that's not, it might not be the most likely scenario, but I don't think it's as low a probability as, you know, if I were to read kind of Twitter sentiment. You know, I have a counter take on that, which is I think the more that miners do something adversarial around the merge, the sooner the merch will happen, not the later.

Wait, I'm sorry, the more that miners do what? the more miners engage in adversarial behavior around the merge, I think, the more likely are Ethereum core developers to pull the merch ahead instead of pushing it out. That would be my take based on conversations with them. Right. I'm not sure how easy it is to gauge whether they'd actually be doing that. I mean, obviously they'd have to collude to do it to some extent and make a new client upgrade and stuff on their own. But I just think the probability of that happening is like weighted way too low to me.

But I think I think like testing wise, I mean the fact that they already got one of the test nets converted is actually a good sign. I'm just still a little more. I just think like, yeah, the minor adversarial behavior I think is maybe being somewhat underestimated. So I think my conscience is probably like a little less than Hussu, but like six or seven. Yeah. after reporting on my book and how the ether classic thing went down, I would definitely say it does not take a big group of people. Yeah, because back at that time, you know, most people in Ethereum really did support the hard fork actually, at least as far as I can tell.

And I definitely think, as we've seen, that it was certainly a minority, but that's all you need, really. So after their, after stakeholders are able to withdraw their their steak teeth after the merch, how do you expect them to behave in terms of the withdrawing? Do you expect to see that everybody will want to withdraw or do you think it'll be kind of a slower type of withdrawal or how do you see that playing out? I quite the opposite I think so not after withdraw it's an end but I think first of all like after the merge I think the demand to stake will go up why because right now stake us on the beacon chain only on the beacon chain block subsidy but after the merge the beacon chain chain will be responsible for ordering Ethereum itself, right? So it will run transaction fees

and MEP on top. So you can expect the staking yield to go up quite a bit from where it is today. So I think that will, I mean, also sort of reducing this entire uncertainty around will the merge happen and what timeline will it happen. I think sort of confidence in Ethereum's ability to execute on major upgrades will go way up, sort of making investors more optimistic about the longevity in of the project. So I would expect sort of actually like much more stake to come in after the merge. And then yeah, it doesn't really make sense that there would be large withdrawals. Unless in fact, state EF at the time is then trading like below one EF. As we said, there are market conditions where it can trade below one EF. And if that happens, then the arbitrage

will ensure that state EF is being bought up on the market at the discount and then withdrawn and then the state, the EVE is pulled out and sold. in order to make a profit. So that's when you should expect withdrawals to happen. But if St.Eath is trading anywhere near to one EVE, then I don't see any reason why there should be any withdrawals. I think one sort of important thing that will be true is just like how liquidity incentivization works around the withdrawal event.

So if, you know, there's a multiple AMMs with, you know, greater than 20 plus percent, of the overall liquidity so that, you know, you have one that's maybe like a curve pool that's good for when you're in kind of the mean reverting phase and you have something that's more like Uniswap V3 for that phase and you have incentivized liquidity accurately between the two of those. I think you could actually be quite fine, even if people are unlevering because there is one other impact, which is upon the merge, people who were really levered may actually want to lower their leverage in stake terms and increase it in ethelvering. raw eth terms, depending on what yield opportunities exist post-smerge, which they might be,

there might be yield opportunities that are specialized to eth-2 at launch that basically, you know, you can't access with staked eth. So that would be a condition, I would say, like, provided the liquidity incentivization is diffuse enough and can cover sort of these sort of automated rebalancing strategies. I think it should be relatively safe. I don't, yeah, to kind of the same as Hossus point out, I don't really expect people to just like rush to the exit all at the same time. Unless, yeah, unless there's really some real reason to redeem for your raw ETH immediately.

I think there'll be a lot of people who do it just to test it and see, just, you know, imagine you've had you you minted steak to eat at Genesis like of course you're going to redeem some to see if it's working correctly right like at that at the end of it is that that there's there's certainly going to be some amount of that but I would the only people I'd be worried about are people who are like automated vault strategies that have you know significant amount of tvL and they they try to redeem because there's some new yield form and So what do you guys expect to happen to the price of Steeth after people can withdraw their ETH? Well, I mean, after that point, the prices are sort of tethered at one-to-one, due to arbitrage.

So as we already touched on earlier, so if Stake Dief are trading above one EVE, then people should mint more of it and sell it, bringing the price back down. And if stake-de-eve are trading below one-Eave, then people should buy it on the market and withdraw the EVE and sell it, bringing the price up. So sort of leaving out sort of more nuanced sort of points like there being like a withdrawal queue, then I would say that the price is like absent sort of this nuanced, the prices are tethered one-to-one. Same as you would expect with something like USDC or a tether or WBTC where arbitragers are basically always keeping, you know, the price of these in line with the underlying. So another potential issue with Staked Eath is how dominant Lido is in particular. And as Teroon mentioned earlier, Lido's market share of all Staked Eith on the Beacon Chain

is about 91% of all of the Staked Eth derivatives. So why do you think that level of dominance has happened? First of all, I would say sort of the 91% number is sort of a bit misleading. I think what I would look at is sort of the overall share of Lido on the beacon chain, which is around 32% the time of recording, I believe. So first of all, I would think, there's like two lenses, basically, to look at this from. The first is Lido's impact on Ethereum security. And the second is then looking at the counterfeiture.

So what if Lido didn't exist? And so starting with the first one, I think there are some arguments that you can make that LIDO is in fact very good for Ethereum security. Why? Because Lido dramatically lowers the cost of staking, by making it more accessible and by making it more liquid and so on. So in equilibrium with Lido in existence, staking is much cheaper. And as a result, the total amount of stake that secures Ethereum in proof of stake

is going to be much higher. So any outside attacker to Ethereum, you know, has a much higher cost, basically, to bring the system down. And then you can also argue that sort of Lido is bad for Ethereum security in other ways, mainly that it introduces one more layer of sort of principal agent relationship, right? Because these stakeholders, they give Lido the EVE and Lido then distributes it to. different node operators. So if you compared this to a word without LiDo, then Stacus would directly choose the node operator. So there's like one more layer basically of intermediation between that. And so you could say, and I think the popular argument goes like this, Lido can exert soft power on these node operators in order to do certain things that can be bad for Ethereum. So that is sort of

the first lens that I look at it from. Then the second lens is, I want to of Lidlidu didn't exist. So almost from the start, I have been operating under this assumption that sort of the winner in liquid staking. So first of all, that liquid staking is superior to any other farm of staking. And the users, like all things equal, will always prefer it because they want the lowest cost of staking. And liquid staking providers can provide that. And then between liquid staking providers, and this includes large exchanges, there's going to be a large winner-take-most effect.

Because as a user, why should you ever not stake with the largest provider? That is sort of the most secure, the most liquid, the most accepted in defy protocols, has the best TV, sort of the best loan to value ratios and so on. So basically, the market leader always has the most chance to attract the next deposit that comes into the beacon chain. And so going from this assumption, I was thinking, okay, so there is going to be one big winner from this. So what do we do? Like we really have to make sure that like a group of centralized exchanges or what worked even more is like a USDC version of liquid staking that is sort of custodied and highly regulated.

So same as like we saw this in stable coins, right? the tether had a big start, but then USDC just started to crowd it out completely. And I was worried that the exact same thing would happen to liquid staking. So my approach was, okay, so we really need to make sure if there's going to be one large winner, and I found this outcome to be like exceedingly likely, that we ensure that this winner is the most decentralized that it can be. And this sort of really motivated me to choose LIDO and support them very actively. So both that Lido can win this market, but also that I and other sort of exert pressure on Lido

and really do the necessary research in order to make it as decentralized as possible. So it sounds like you are not super concerned about its dominance amongst the liquids taking providers to ruin are you at all um so like actually before lido existed i wrote this paper with alex evans from well now bane i guess um who about staking derivatives because you know like everything in crypto people in in proof of stake land cosmos came up with all the ideas first but never implemented them first and staking derivatives actually like originated in the cosmos ecosystem. Far before Ethereum, it sort of showed up in Ethereum. And the main result of this paper is just that staking derivatives do one thing. They democratize access to opportunities, but they

also have these de-leveraging spirals. So there's like this trade-off. You kind of like want to balance the two of like, hey, small stakers or smaller participants can get like equal access to yield. but also like, hey, there's a ton of leverage, weird leverage games that happen in the system and you want to kind of tune this system via a combination of incentives and sort of AMM fees and other things to make it stable. From that lens, I think having a dominant provider that has the most liquidity does actually make sense. I would say the thing I'm more, someone more worried about is that the, it's not, and Haseau, of course, can probably talk a little bit more about the dual governance structure that's being thought of.

But I do think Lido as a governance token does seem somewhat a bit scary if you believe that Ethereum should effectively not have like on-chain governance for its existence. Now, I'm not saying that, I'm not even sure that's a universally accepted truth in Ethereumland, but certainly, of course, if you asked Vitalik, you would say it shouldn't have that. And so I think that that's sort of where I think some of the weirdness comes in. I think the centralized entities and centralized sort of state-eat-eat narrative is definitely true. I mean, it's pretty clear that a lot, like, you know, hey, It's only 35% of the market that's in staking derivative. So the rest is somewhere.

And the rest of that is not at like, hey, I'm in my basement, like, running a validation node. Like, that's definitely not making up 64%. Most of that is at, like, finance and other places that offer this already. Although, of course, Binances is not the USCC. It's more the USDT of this analogy. The interesting thing was that the Binance staking derivative crash. price-wise significantly far before the Staked-Eath price change.

And there was a while, I think, probably like January through March where people really thought there would basically be like some sort of parity trade between the centralized staked-eith derivatives and the sort of real ones. And it turned out that was not totally true. and people were sort of a little more reckless on centralized exchanges. So I think it's actually quite good to have a dominant source of liquidity. I actually think the liquidity fragmentation, even that paper from March 2020, does show that if you have liquidity fragmentation,

you have way more of these sort of like tail events that kind of can blow the system up. And we already see liquidity fragmentation not causing these different assets that theoretically should be sort of like at par to be anywhere near each other. Oh, that's interesting. Having more liquidity fragmentation causes more scenarios where the system blows up. That's so counterintuitive. It's like if you think about people who are taking, one way of being a staking derivative is also as like basically sort of a collateralized loan.

And from that lens, there's sort of some liquidation condition, whether it's getting slashed or whether it's, you know, something that causes the thing to go under. And in that case, the idea is like, you have, it's exactly what we saw with Avey. Like you have these cascades and, you know, if there's not enough liquidity, the cascades happen faster because like the price is changing faster, right? So there's sort of this natural, again, tradeoff. And then this is why it's quite important to incentivize liquidity in multiple venues, but for the same asset.

So I just generally think like we've are, these are the vignettes. that we've seen in practice that represent this thing that like, you know, theoretically existed. So like, you know, two years later you could say that like, hey, a lot of those kind of predictions came true. But yeah, I'm not so worried about the dominance as much as the as much as like the governance aspect of Lido. Okay. Yeah. So let's talk about that because, you know, as you mentioned, people have been pointing out that the owners of the Lido token LDO may not always have. of the same incentives, either as stakers do or even just normal Ethereum holders or even

the same interest as Ethereum itself. And so Lido did recently float a proposal to reduce the power of governance over Lido. And one of the ways that's proposing to do this is through a process called ossification. You guys, I tried reading this proposal and I was like, granted, I was falling asleep. So maybe that didn't help. But please explain this. I mean, it just sort of feels like you're limiting the amount that people can do via governance. But that was as far as I got. So maybe you want to talk about it more, especially you, Hasu. You got it exactly right. ossification means limiting the amount that people can do via governance. But let me start at an earlier point. So Stekas give Eve to Lido. Then Lido gives it to Nodor operators, covered this. And this is

a principal agent problem. Because we have this. one intermediary who might not be at all times incentivized to act in the best interest of the agent, which is Stakers. And you have this both, even if Lido were just on Ethereum, you would have this problem. But it's sort of further exhibited by the fact that Lido also is on other blockchains and they share the same governance token. So right now, I think Lido, so Ethereum is like 95% or more of Lido's revenue. So really, like, all of Lido's focus is on Ethereum. But there's no guarantee that this is always going to be the case.

So we need to make sure that sort of LDO holder, sort of that, they don't sort of mix incentives across different chains, right? What's best for Lido, if Lido is on many chains, might not be the best for Ethereum. That is just its own chain. So I think it's important for one to sort of disentangle the governance of Lido on Ethereum, from Lido on Solana and from Lido on Bokad and so on. And there are generally two solutions to that problem, to that principal agent problem. And the first is the one that you mentioned is ossification.

So if the agent doesn't, like they cannot do anything wrong, like they literally cannot make a proposal that would hurt Stakers. then that's, of course, way preferable, right? So we can see in this whole debate that Lydel may not want to do anything, or the olders may not want to do anything that's bad for stakers, but just the fact that they cannot prove it to them and to Ethereum developers is sort of a problem that currently hinders, you know, them growing further. So we can see that sort of this ability for governance to do something bad

is a major problem for the customers, but also for Lido itself. And so they are really aligned in removing the ability to do anything bad. And the way that they want to do this is first remove any levers that would allow them to do something bad. And where that is not possible yet, for example, because Ethereum's staking contract itself, the merge hasn't happened, withdrawals aren't finalized. So Ethereum's contracts themselves are not yet ossified. So what LIDO wants to do in the meantime is introduce a dual governance model. And what this dual governance model does is it allows the same as today, LDO holders to make proposals in governance and vote for them.

But then the Staked Eve holders can veto any decision that the LDO holders want to make. And so this way, if there were a decision that is about to pass on chain, then state eFoders can say, wait a minute, this is not in our best interest. And so we are going to block this proposal. And then it doesn't get enacted on chain. And so, yeah, what this basically does is it prevents sort of the most adversarial outcomes against stake eForders. At least that's our hope because they can always just prevent a proposal from going on. chain. And to Tarun's point, I'm not sure if this is on-chain governance. I mean, it's not like sort of we are making any proposals to how Ethereum should be changed. It's more like

Ethereum holders can have a say in what Lido is not to do. So I think I would like delineate a veto right from on-chain governance in that case. I'm curious to me, what do you think? Yeah, I mean, I think the interesting thing about this sort of bear market, like, if we take like the first bear market of Ethereum, it was like the Dow hack happened. If we take the second sort of big bear market, it was like, hey, we have the ICO boom, but like no one could figure out what to do with it. But then over that bear market, we kind of developed Dow's that actually worked. A lot of the improvements that have been made were to like the structure of how Dow contracts work and like what types of proposals were allowed

and like how execution of things on chain work. Obviously, some of this happened on other chains, but in Ethereum land, I think some of the standards and norms are codified, things were able to operate. And what I think we're seeing now is a lot of these like dual class Dow type structures. Like optimism has a sort of dual class Dow where they effectively have something that's like a House of Representatives in the Senate in some ways.

And I kind of feel like adding this VDHA, is effectively doing the same thing. It's like it's a different form of like how do we have like dual class governance. Still sort of a form of on-chain governance. I just think it like has more more checks and balances, I suppose. That's interesting. One other thing that I wanted to ask about here was so at the time that we're recording, I should reveal to people Friday, June 28th.

Lido just released a proposal on whether or not it should limit the amount of stacked ETH that it should account for, like the percentage of staked Eith, by the way, it's a typo in my script. By the time that this episode comes out, this vote will have been decided. So since, you know, the vote will be over by then. It might be interesting as a historical artifact to hear how each of you kind of think about this proposal. You know, do you guys think that Lido should self-limit? How do you determine what the limit should be, et cetera? Well, I think so for one, it's not guaranteed. I don't think the proposal is necessarily over because it's a two-stage proposal.

I believe there's one week of voting whether Lido should self-limit. And if the answer to that is yes, then there's another week of voting, how it should self-limit. Oh, got it. Oh, got it. Yeah, I just looked at the first deadline. Okay, so maybe part of the vote will have been decided, but not the rest. Yeah. So, I mean, I definitely, I have laid out my case why I think Lido should definitely not self-limit. I think the market for liquid staking is win-a-take-most. And there are outcomes for Ethereum that are much worse, like a USDC of liquid-staking, taking the market, I think. And

as to run saying, fragmentation, if it were to exist also has way more edge cases. So I think what we, so my approach from the start has been to support the most decentralized and liquid-staking provider. That's what I will continue to do. And so I'm voting not to self-limit, but instead to ossify LIDO as much as possible and enact this dual governance model. I don't know if self-limiting actually will work

because one other thing that's quite important is that Lido stake ETH actually can be used in other protocols. and I don't think we've even gotten to confidence in any of the other providers. I mean, so there's a very famous incident with Celsius where they had a lot of ETH at a stake Eth provider called Steakound, and then they had this, I wouldn't even call it a hack. I would call it a little more like incompetence because of the way they published their BLS sort of file. But there hasn't been a lot of faith in other staking providers yet.

And I'm not saying that can't happen, but I feel like if you impose a cap, you will probably move most of that ETH to centralized exchanges and not to other staking providers, simply because of the track record so far and because people are skittish. So I just don't think the caps are that necessarily, I think they have these kind of second order effects that might not mean that they kind of end up being useless or like don't help that much. So it sounds like you also think that this proposal is a bad idea? I don't think it's necessarily a bad idea fully. I just kind of am not, I'm not, I'm kind of 50-50 on it. I'm like, I could see why you would do it from a social scalability point of view, perhaps. But I could also see second order effects being bad. And I have no clue how you would choose what percent you want to make it.

Do you make it the BFT threshold of one-third? Do you make it like somewhere below that because of like, flashing communication limits. There's all sorts of both theoretical numbers of thresholds where you would maybe cut it off versus like practical ones, like how much liquidity can you actually incentivize if you only have X percent of the market share. And I think like that type of analysis hasn't also been done. So I'm sort of indifferent.

I kind of, I agree with hostification seems better. I just think we have to find some protocols that have been able to successfully do. that and maybe this will be the first that can can really ossify itself. Yeah, I have to say the one thing about that is that I just think about so many of the kind of different emergency situations that can come up. And as new developments happen, like there wouldn't there just naturally be changes that would need to be incorporated? So maybe I just didn't understand their proposal, like I said earlier. Does it account for that? It's so yes, basically. I mean, it's a, it's a tool. Two steps for like a new proposal to go on chain after this dual governance system has been put in place.

For one, if LDO governors want to change LIDO, then they have to make a proposal. And then there is a time lock. So I don't know what is the current proposal. It's like one month, I think. So plenty of time for the community to review the proposal. And then before it goes on chain, staked eFoulders have the ability to veto the proposal and prevent it from going. on chain. So, but if they don't veto, then it just passes like it normally would. So Lido can still be upgraded. It just cannot be upgraded in ways that would be clearly bad for

stake defaulters. Yeah. I just wonder, like I said, if there's some kind of emergency, whatever, some kind of bug. Oh, you mean for Lido, if Lido needs basically the ability to react quickly to upgrade this protocol to protect Stakers, yeah. Yeah. Then how do they handle that? that is basically sort of the trade-off that you always have whenever you have a time lock, right? So a time lock protects the users of the protocol from the operator going rogue, but sort of a time lock that is too long sort of fails to protect them from sort of forces of nature, basically, where the operator could protect them. So I think we have seen some ideas around that where, for example,

what if sufficiently many stakers voted in favor of the proposal, then it would pass immediately. So I'd have to look up what is the current thinking around this in the proposal and then get back to you. Another aspect of this that I think hasn't been totally deviated. Is there some sort of like off-chain logic that theoretically Lido governance controls that is not really sort of true for state ETH, in the sense that there's sort of the assignment mechanism which assigns which validators

is getting which block sort of like a pool, like this sort of threshold signature thing. There's sort of the queuing model of like how do you do withdrawals, how do you rebalance withdrawals? Like what if one validator has a million aeth and one has a hundred eth? How do you like divide up and someone wants to withdraw a thousandeth? Do you take it all from the million? Do you take some from the million, some from the hundred? Like there's all these like nuanced things. Those things are not core to Ethereum, right?

Those things are core to how Lido coordinates Valdeut. those things can be voted on separately from things that are core to Ethereum. And so that somehow I don't know exactly what the correct abstraction line is, but I suspect that Lido, the token, will be allowed to respond to

these sort of like a well-called off-chain but these coordination mechanisms for the people who are participating in Lido as operators. That might still have a sort of like not ossified state or like a less ossified state. And I suspect that will be one.

of the things that kind of either emergently happens due to some, you know, as the validators that grows or something like that happens or not. Yeah. I think that makes a lot of sense, not just the lie do, but just in general. I think whenever you have on chain governance, so on chain governance is basically a liability to your protocol. And so you want to limit it as much as you can. That's what we meant with ossification.

So if you can, for example, say that only a certain parameter, in your protocol can be subject to governance, but for example, not replacing the entire contract or not changing any parameters that don't need changing, then that's always preferable. So I think, yeah, these are like two efforts that are going in parallel. So ossifying as much as possible. And then for what cannot be ossified, just provide checks and balances for the users of the protocol. Okay. So for final question of the show, why don't we just have each of you.

talk about what you think are kind of the main takeaways that people can learn from kind of all the recent events involving Staked Heath, especially in terms of users who are trying to figure out, should I use one of these like good sticking protocols? If so, what should I do with the state eth, you know, et cetera? Yeah, if you could just talk about how you think about these things, that'd be great. So I think, I think like the main lessons we learned are, A, liquidity optimization for derivatives is quite important. It needs to adjust with both the leverage in the system and sort of the types of users in the system.

And I think, like, obviously that's improving over time. But, you know, of course, these tail cases are the times you learn where you're caught naked the most. I think the other thing that's important to reason about is sort of the fact that, A, there's so much uncertainty in the merge time. I think it would be irresponsible to say, hey, the merge is definitely happening by X, like some people like to say.

I just basically say if there's some variance in that time, expected time to merge, then there's also some variance in your yield because your notion of when you realize that yield is now has some variance in it. Right. So that has to get priced in somehow. And I think that because of that, these derivatives at least offer you some way of earning some income, you know, via like providing liquidity to these curve pools or lending an AVE. That it kind of at least partially compensates for this like time risk, this variance in time risk. And so I think that is a reason there, from a financial standpoint, strictly better than the centralized versions.

Because the centralized versions can't really escape the exchange. Maybe Binance will make it so that you can use it in BSC or something. But I just don't see this compensation factor coming from the centralized entities. And if that can be the moat for the decentralized ones, that's probably the best long-term outcome. But I also just think sometimes, especially Ethereum developers, are a little irresponsible with their statements. because there's just a lot of investors who,

they don't read the Ethereum 2 roadmap. They're not like reading the GitHub issues. They're not reading the pull request. They're just like, oh, like this guy on Twitter said it's happening in March. I'm going to go buy a bunch. And then like you saw that with Sue. Like, you mean, he was like, he would just like tweet this stuff. And like I was like, you know, somehow like people need,

there needs to be some form of like structured PR about things with uncertain timelines that isn't just like, yeah, it'll be done by August. Yeah, exactly. I mean, it's not the statements that they make. It's the lack of statements, right? So you have this huge demand from the community, from media and from investors to sort of get confidence levels on when the merch is going to happen. How is it going? What are the remaining roadblocks? But there's just, as Teruun says, no structured PR around this. I mean, they could just put something on the website and, you know, updated occasionally when new information comes up. and have some kind of official stance. So the absence of an official stance is sort of what creates this, you know, confusion, I think. And yeah. So I think that's one takeaway.

I think there are some takeaways for different participants. So I think if you're a holder of Staked Eve, then I think, I mean, this was a reminder to be careful with your use of leverage. I mean, crypto is so volatile that every cycle, just a ton of people get just blown out. from using leverage irresponsibly. And I mean, I would argue that you don't need to use leverage at all unless you really know what you're doing. Then you need a good pricing model.

So that's sort of the next takeaway that it turns out like a lot of people actually don't understand where state EVE should trade in relation to EVE and sort of what are the, what are the sort of the forces that push it there. Then if you're a holder of EVE, then I think now sort of the distance. is like at less than 3% at the time of recording. But it used to be at like 6, 7%. So if you're a holder of Eve and you have been looking to stake and maybe haven't made the jump in, I think for many, this has just represented like an opportunity

to buy Eve practically at a discount, right? Because if you're an EF holder and you're willing to, you don't need to sell for one year and you can just sit out the price volatility, then at some point this was like a 10, 15, percent free yield for you basically, right? Because you were buying it at a discount, but then you also get the staking yield on top. So the staking yield were 5 percent and then the discount was 7 percent and you would get 12 percent in Eve dominated for waiting one year, right?

So cleaned up for any risks that you incur in the meantime. And then the final takeaway for me is, and this is like, oh, like this is like one of my favorite topics at all in crypto, which is governance is a liability. to any protocol, especially defy protocols, because it makes it more expensive for customers to trust you. And so you want to reduce it as much as possible, right? And so to me, this just validates, like in a massive way, sort of the whole reasons why we use blockchains in the first place,

because in the real world, companies are spending so much money in creating trust with their customers because they cannot prove to them that they cannot misbehave, right? But blockchains allow you, and smart contracts allow you to prove in an incredibly cheap way that like your business is going to do exactly what it says it's going to do. And to me, this is just, I mean, this whole saga, to me, it's just like just further validation that blockchains are incredible technology. All right.

Well, this has been an incredibly fascinating discussion. Thank you both so much. Or can people learn more about each of you and your work? I would say come follow me on Twitter. I'm Harsu-F-L. And yeah, you can check out my articles. Everything's on Twitter. And yeah, also make sure to check out my podcast.

It's called Uncommon Quar. Yeah, and I think Twitter is also probably the best place. It's Turun, T-A-R-U-N, Chitra, C-H-I-T-R-A. And yeah, a lot of my work and research is also online. And yeah, so happy to. But I try to talk about it on Twitter a lot, so it's a pretty easy as a place to find it. Okay. Yeah.

And you can also listen to Turun on the shopping blog here at Unchained. All right, you guys, it has been such a pleasure having you. Thank you so much. Yeah, thank you so much, Laura. And thanks, thanks to run. Thanks so much for joining us today. to learn more about Hasu, Tarun, and all these issues around Snake Deep. Check out the show notes for this episode. Unchained is produced by me, Laura Shin, with help from Anthony Yun, Matt Pilchard, Juan Orenovich, Pam Majimdar, Shashonk, and CLK transcription.

Thanks for listening.