Following the launch of Hidden Hand and Pirex, OHM fork Redacted Cartel is launching its new, native stablecoin — Dinero.
In the beginning of a period that was later dubbed "DeFi 2.0", a revolutionary project and concept was launched. This project was OlympusDAO, sometimes better known by its ticker, OHM. OlympusDAO sought to create a decentralized reserve currency in DeFi, by using OHM as a currency with a fixed purchasing power through rebasing. OHM’s price would be stabilized by a financial mechanism known as “bonds'' — for instance, reserve bonds where OHM is sold at a discount for treasury assets when conditions are bullish and bought using treasury assets when conditions are bearish. Inverse bonds also stabilize OHM’s price, by selling treasury assets (typically stablecoins) for OHM to absorb the selling pressure. Other types of bonds help to accumulate liquidity for OlympusDAO.
This model became extremely popular in 2021, spawning hundreds of similar projects, termed “OHM forks” across all chains and offering insanely high APYs. Many of these OHM forks suffered violent and dramatic crashes and were never mentioned again. But one such “OHM fork” has survived till today and is still shipping highly innovative products that continue to drive value back to their stakeholders. This project is Redacted Cartel.
Source: Redacted Cartel
Since their launch in December 2021, Redacted Cartel has since released two products, Hidden Hand and Pirex, as part of their suite of DeFi products to empower on-chain liquidity and cash-flow for DeFi protocols. In mid-2022, Redacted Cartel team members started to tease the upcoming launch of their third product, Dinero, a Redacted Cartel native stablecoin.
What Is Redacted Cartel (BTRFLY)?
Source: https://coinmarketcap.com/currencies/redacted/
While initially conceptualized as an OHM fork, Redacted Cartel quickly expanded and proved themselves much more with their focus on becoming a hub for DeFi protocols and a dominant controller of on-chain liquidity, initially centered around the Curve Finance ecosystem.
Their first product, Hidden Hand, launched in April 2022 to prove this very point. Hidden Hand is a bribe marketplace, designed to help protocols maximize the efficiency of their governance process and to optimize the bribe process. Bribes are fees paid by other DeFi protocols to incentivize certain voting behavior by token holders to benefit their own protocol. With the Hidden Hand, users delegate their governance tokens, and hence their voting power, to the Hidden Hand. At the same time, DeFi protocols deposit their bribes into the Hidden Hand contract. This marketplace then seeks the optimal vote distribution that yields the greatest rewards in bribes for the users. Through this process, Redacted Cartel takes a fee which is distributed to BTRFLY lockers and the Redacted Cartel Treasury.
Hidden Hand originally launched with three prominent DeFi protocols: Frax, Ribbon Finance and Balancer, but has since expanded to more than 10.
Hidden Hand Mechanics (Source: Redacted Cartel Docs)
Later in the same quarter, Redacted Cartel released Pirex, their second product. Pirex set their focus on liquid wrappers for specific locked governance tokens and tokenization of yield, which Pirex first launched for the Convex token, CVX. CVX, by design, can be locked as vote-locked CVX (vlCVX) which allows holders to vote on Convex governance and earn a portion of the Convex Protocol’s fees. However, vlCVX is non-transferable. As such, Pirex enabled a liquid wrapper, pxCVX, allowing users to deposit CVX with Pirex to receive pxCVX, allowing them to receive rewards from Convex but at the same time providing them with the flexibility which was not originally available with vlCVX. Perhaps more interestingly, Pirex allows the rights to future bribes to be sold on the open market, further increasing flexibility for holders of said governance tokens. Pirex also later expanded to include popular perpetuals decentralized exchange (DEX), GMX. Pirex funnels 75% of their fees to Redacted Cartel which is distributed across BTRFLY lockers, Redacted Cartel Treasury and the DAO reserves.
Pirex Mechanics (Source: Redacted Cartel Docs)
Finally, ever since mid-2022, Redacted Cartel has also begun discussing the design and launch of Dinero, their own native stablecoin.
But, what is Dinero?
How Does Dinero Work?
While the whitepaper for Dinero has not been released yet, clues about the mechanism and design of Dinero can be inferred through comments from Redacted Cartel members.
So far, Redacted Cartel’s products have been products built upon other core DeFi protocols. With Dinero, Redacted Cartel aims to fix this.
Redacted Cartel is looking to launch their very own ETH validator, in conjunction with their stablecoin, Dinero, which is backed by ETH staked with their validator. Users stake ETH with Redacted and are then able to take a loan out against their staked ETH in Dinero. This puts Redacted Cartel directly in the liquid staking derivative (LSD) race, against some of the largest protocols out there such as Lido, Rocketpool and Frax.
Read more: The Ultimate Guide to Ethereum Liquid Staking in 2023
But that’s not all. As they accumulate staked ETH with their validator, Redacted Cartel accrues more validation power as well, which could give them a foothold into the Miner Extractable Value (MEV) market, a lucrative space with a high barrier to entry. To add to that, Redacted Cartel also looks to use Dinero as a gas token for the Redacted Cartel validation layer, granting further utility to the token.
As part of the bigger picture, Pirex will likely also be integrated with Dinero, providing liquidity to Redacted Cartel’s ETH LSD token as well as creating a market for the future tokenized yield of the staked ETH tokens. This can be used by speculators to bet on the future yield of staked ETH. In fact, Redacted Cartel’s co-founder, 0xSami, has mentioned that Pirex was designed specifically with Dinero in mind.
Why Is Dinero Important?
From the perspective of the DeFi space, Dinero could be the one to dominate the decentralized stablecoin space, after Terra’s UST collapse in 2022 left many smaller alternatives fighting for the throne. With Redacted Cartel’s strength in liquidity direction due to their outsized holdings in various governance tokens, Redacted Cartel could easily funnel incentives to support Dinero liquidity and their validator layer.
Moreover, for Redacted Cartel themselves, borrowing fees on Dinero will likely be channeled to the Treasury and BTRFLY lockers, generating a new revenue stream for the protocol. Moveover, ETH staking rewards can be used to pay down collateral over time, reducing liquidation risk for borrowers.
Conclusion
Redacted Cartel has certainly achieved much with just over one year since their initial launch. With two successful products and another on the way, Redacted Cartel is cementing themselves as the team to watch in the DeFi space.
With Dinero and the possibility of a Redacted Cartel powered validator, Redacted Cartel is positioning themselves on the intersection of huge DeFi narratives: decentralized stablecoins, LSDs and MEV, which could bring all eyes back on them again in 2023.
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