Trade Your Bag Like An Institution, Become Your Own Institution
The jig is up on the traditional financial system. It seems as perhaps it just was not built for the modern era. The institutions that brought forth the current financial era are failing. Banks, traditional market participants, fancy phone apps that gamify finance, and the companies that have talking heads just pitching their stock bag. They are the old guard and they are not doing well. Investors feel that change is in the air and the paradigm is shifting dramatically.
The new model puts you, the investor, in the center. It empowers the investor to stay agile, deliver impactful returns and make decisions about the future of the products and services they use. This is because the infrastructure(Web3) is delivered through DeFi. With DeFi the goal is now no longer to separate you from your money while taking cuts along the way. Success for these new protocols comes when they grow with the investor. One can now parse what products and services create the pathway to achieve the financial security that they want to build for themselves and their family. This perspective was impossible just a few short years ago. But now it’s here. You can become your own “institution.”
Let’s explore a few category leading protocols and discover how one can achieve this next level of financial control.
*** If you already are sold on DeFi, scroll straight to the discussion of Institutional Grade Protocols. Otherwise, read on!***
The Promise of DeFi
For the first time in the history of finance, financial products are not being designed behind closed doors and then ramrodded into your personal finances. Additionally, what banks and regulators do under the auspice of keeping your capital safe does not really make sense anymore. If one digs in a bit, the ruse becomes evident: It’s not so much that they protect your capital from nefarious actors that might want to separate you from it. They want to protect your capital from you. Yes, you are reading that right. Those that run the global financial system have decided, without asking you, that they are in a better position to decide what happens to your capital than you are. This is where funny little bits of regulatory engineering like the concept of Accredited Investors and Qualified Purchasers. (or skip the link →TL/DR — Both require statistically outsized earnings and savings to participate in — what have historically been — some of the best investment opportunities available. The idea is that larger earnings and savings sum to a higher “Financial IQ” and because some of these investment vehicles are more complex, regulators surmise that they need to protect anyone who is not Accredited or Qualified from being the potential of being duped in some fashion.) This line of reasoning seems dubious. The world of DeFi thinks so too.
In response and largely due to the open marketplace dynamic in which DeFi operates, a new generation of investors is skipping the hurdles that traditional finance has created and are becoming active direct participants in their personal finances. For those that choose to take it a step further, an investor can do more than just actively participate. Not only can they execute fully transparent financial management, they can also, literally, aid in the design and implementation of complex financial tools. The analog is not Accredited Investors or Qualified Purchasers instead it is the capital allocators in which they invest. The institutions. Those are the groups in traditional finance that wield the power to affect the rules of the ecosystem. That is no longer the case.
You can become your own institution, a true Master Of The Web3 Universe.
Here are a few examples to consider as you build your financial fortress:
Team Kujira’s ORCA Protocol
This protocol launched on top of the Anchor Protocol in the Terra Ecosystem. Recall that Anchor is the DeFi savings protocol within Terra. One feature of Anchor is that it allows investors to deposit Luna, in the form of bonded Luna, and then borrow against that deposit in the form of UST. The ratio of borrowed capital to deposited capital is called a Loan to Value Ratio (LTV). The LTV for any borrower must not exceed 60% of loaned assets. If it does, Anchor automatically liquidates part of the loaned assets to bring the LTV back down to a LTV of 48% (In the Anchor docs this is defined as a “safe risk ratio” which must equal 0.8. More info on how that is calculated in the link.)
As LTVs exceed the 60% ceiling, those positions are liquidated. ORCA provides the platform on which participants can bid to purchase those liquidations. ORCA participants can place bids on tranches of liquidations. These tranches are ordered by ascending percentages (1% — 30%) and the liquidations are filled in the ascending order (I.E. Once a particular loan is liquidated, if then the 1% liquidation tranche is filled first — and so on).
This concept is super simple, however, it is not one where there is a real world analog for retail traders. And this is a game changer. You are seeing how institutions work. During a margin call, for example, the broker may extend terms to the trader that is underwater, but the vast majority of the time they have the power of liquidation. If you miss mortgage payments, the bank can come and reclaim your house. As for your debt, that was packaged and sold in a mortgage backed security anyhow. Let’s make an important point:
The number of dollars wielded is not the fundamental difference between institutional and retail investors. Of course that plays a part, but before that consideration there is something more fundamental: visibility. These companies have deep real time access and perspective into the underlying mechanics of the financial system in which both parties, retail and institutional, compete.
That’s right — financial markets are grounds for competition. It’s you versus the institutions. (Products like Robinhood are “free” because you are the product.) That’s how dollars are won and lost. Products like ORCA put a DeFi user in the front row.
Consider using a product like ORCA for a nuanced risk management strategy. Or perhaps a part of your entire personal financial management strategy is just to buy tranches from ORCA and flip them at a premium on the open market. The point is now you see more of the iceberg. And with that comes many more opportunities to grow your wealth.
WhiteWhale Protocol
One of the fundamental differentiators in the Terra ecosystem is the design of UST, the Terra native stablecoin. In a nutshell, UST and LUNA (the Terra native cryptocurrency) work in tandem to ensure that UST maintains its peg to the US Dollar. This happens through an algorithmically actuated arbitrage process. And as we know, arbitrage has the ability to earn risk free returns.
WhatWhale has built an impressive product around the concept of opening up these risk free returns to retail investors. Take a look at this UI.
Market arbitrage is a very special strategy to have at one’s disposal. This means that as UST and LUNA perform in the way that they were intended to, you can reap some of those rewards. The basic perspective: You make money. The extra perspective: You aid in making the network more efficient. This network is a marketplace and efficient markets are the level set for retail normies to have a snowball’s chance to grasp financial freedom. Prior to WhiteWhale — if you don’t have bots, you’re not getting access to these gains. Now, you deposit capital and watch your bag grow.
In CeFi, yes arbitrage exists, but it’s not for us plebs. Billion dollar institutions build artificial motes and castles, have those motes and castles defended by regulatory crooks, and reap the riskless returns of arbitrage. Don’t take my word though, look no further than Citadel as a market maker. But it’s to protect us…. Eh, probably not. 🤷
Mars Protocol
Mars Protocol is building a non-custodial, open source, community governed bank. Let that simmer for just a moment. Yes, that’s correct, they are building a financial institutions that attracts deposits and then loans them out in a transparent, community governed methodology. With Mars Protocol you will have access to capital and visibility into the underlying mechanics of that capital as though you own your own bank. This is institutional grade because, as mentioned above, it increases your visibility into the underlying systems and pathways that determine how the capital flows.
You do not have this viewport now, but once you do, you’ll wonder why your banking relationships have not always been this way.
Let’s pop the hood on Mars.
The Mars Protocol is underpinned by the MARS Money Market. This is where capital is deposited and then lent out. Collateralized borrows have deposited capital and borrow against it. Non-collateralized borrows are basically credit lines that are approved by The Martian Council. The Council is comprised of MARS stakers. This is a big deal. You can now actively participate in creating pathways for capital access…that you can then use.
It doesn’t get much more institutional than that.
The Terra Community Is Building The Future Of Finance
Centralized financial institutions have failed. If things were working out, you would not be on your DeFi journey. The problem is that these groups have built a world that works for them. It does not work for the majority of their customers. This is by design….evidently the system works for some. All the while regulators step in to “protect” the “uninitiated.” Those policies become walls and motes for those that want to transcend and engage in serious wealth building. The difference between retail and institutional is the visibility over those walls and knowing the secret handshake to secure passage over the motes.
The Terra Ecosystem had a clear mandate from the beginning: Build programmable money. Capital that moves programmatically through protocols that provision unfettered visibility — this is DeFi. This is how serious wealth is being built today.
In these systems “retail” simply isn’t a category of participant. Instead, everyone is by default their own institution, because now the visibility needed to make institutional grade decisions is available. Take this new found power and really learn it. Then apply it. Build your financial world. No permission needed.
Trade your bag like an institution, become your own institution.
Lfg.
