New demand for Bitcoin, YAM & crypto exchanges
This week’s blockchain insights introduce the full life-cycle of the YAM project, new demand for Bitcoin and crypto exchanges & indicators to consider when evaluating Defi projects.
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YAM Finance: Launch, growth, death & rebirth
YAM finance launched its token & liquidity mining program last weekend. It was built within 10 days and introduced as a “high-risk experiment” with its unaudited contracts & non-standard ERC20 templates. Nonetheless, it attracted more than 50 million USD in locked funds within one hour and more than 500 million USD within 2 days. This experiment was very interesting due to the evolving governance in the hands of the community and the liquidity mining incentives for all major Defi projects.
YAM: An Experiment in Fair Farming, Governance, and Elasticity https://t.co/cyzvHZ2Blx
— Yam Finance (@YamFinance) August 11, 2020
YAM finance included interesting mechanisms from Ampleforth and YFI that further incentivized the staking of tokens in the protocol and holding of YAMs. Before the rebasing, a bug in the rebase contract was discovered. This led to yCRV being at risk of being stuck if governance could not pass proposals. A flaw prevented proposal execution. This was an essential part of the protocol and the YAM price dropped significantly (and may stay between 0-1).
The concern is the same as before: the yCRV accumulated in the reserves during rebase is at risk of being stuck if governance cannot pass proposals. https://t.co/KJxRIxk0ZP
— Yam Finance (@YamFinance) August 13, 2020
Since then, the YAM core team and the community have taken huge steps towards YAM 2.0. An audit was funded with more than 75K USD. A migration plan towards YAM 2 and YAM 3 was created and the community is getting organized in a Discord channel.
— Yam Finance (@YamFinance) August 14, 2020
Blockchain insights and rising demand for Bitcoin & exchanges
Here’s a new introduction to token economics, how they evolved, and the future of incentivized mechanism design.
A Primer on Token Economics and Incentivized Mechanism Design https://t.co/FDTEoKtzuS via @megatron Really interesting ideas about 4th gen tokenomics. I agree having an identity tied to blockchain functions will probably be the next step.
— nole (@nole37262040) August 9, 2020
The cooperation among protocols and symbiotic network effects are quickly taking off in Defi and crypto.
1/3 Most outsiders misunderstand the DeFi network effect that allows new players to bag three birds with one stone.
— gavin (@GavinMcDermott) August 12, 2020
The time to market of blockchain projects is getting reduced to a minimum. YFI tests in production, releases new products on the go; YAM launched unaudited after 10 days; project Serum was launched on major exchanges 6 weeks after coming up with the idea. Many of the projects are either started by a community or directly by a few Defi-insider investors – leveraging existing communities & reputable advisors. “Traditional crypto investors/funds” are not consulted and struggling to get into the most exciting projects.
One interesting development I’m seeing in early-stage #DeFi fundraising: with investor demand heating up, the most talented entrepreneurs are increasingly seeking out DeFi-focused funds and angels that have a track record in the space, rather than any old crypto fund.
— Spencer Noon (@spencernoon) August 13, 2020
The first “normal companies” (MicroStrategy) started investing in Bitcoin as part of a capital allocation strategy to maximize long-term value for shareholders & benefit from better appreciation potential than holding cash.
— Michael Saylor (@michael_saylor) August 11, 2020
Coinlist couldn’t handle the significant load during the Near protocol token sale. They had to delay the sale one day.
CoinList is under significant load and we are scaling our capacity. Thank you for your patience and apologies for any errors you are currently seeing on the site.
— CoinList (@CoinList) August 11, 2020
DEX aggregator 1inchExchange announced another AMM protocol called Mooniswap.
— Mooniswap (@mooniswap) August 10, 2020
In this bullish market, it’s good to reming oneself of the “shitcoin waterfall” and steps a project and its investors go through. In Defi, especially fair-launched Defi projects, the actors changed slightly but the game is still the same. For example, big insider whales provide a lot of liquidity early on, get more tokens and dump later on retail/less informed people.
in case u forgot the shitcoin waterfall, it goes like this (from a sept 2018 slide deck)
the players and steps have changed a bit but the game is basically the same pic.twitter.com/jDvNWtnEvW
— Meltem Demirors (@Melt_Dem) August 13, 2020
In 2017/18, there were already in-depth discussions on whether insiders and large holders had to disclose their token sales in advance – similar to regulated capital markets.
8/ Over in another section of crypto twitter, Ryan instigated this super interesting conversation about whether the community should demand that VCs who sell tokens disclose those moves publicly to reduce the ‘shitcoin waterfall’ that dumps coins on retail https://t.co/X1JSKLTeb6
— Nathaniel Whittemore (@nlw) July 29, 2018
DeFi investment indicators
Most investment discussions in DeFi circle around the total value locked. This is just one indicator and in some cases, the same values have been counted multiple times.
A lot of talk these days around the total value locked in DeFI.
However all of them count the same $ many times.
So I did my own calc to find out how much is actually locked in top 15 DeFi protocols.
Answer: $3.5bil. (compared to $6.7bil on @defipulse)
— Damir Bandalo (@damirbandalo) August 16, 2020
Spencer Noon shared 7 indicators DeFi investors should consider when evaluating projects.
7 indicators every #DeFi investor should be using to evaluate projects 👇🏼
— Spencer Noon (@spencernoon) August 16, 2020
We believe revenues should be the ultimate KPI per Defi protocol but it may be worth looking into 4 more “soft metrics” as well in the current market environment to identify risks & potential of being quickly adopted.
- Total Value Locked / Fully-Diluted Marketcap
- Marketcap / Revenue
- % of Token Supply on Exchanges
- Unique Address Growth
- Token Balance Change on Exchanges
- Non-Speculative Usage
- Liquid Inflation Rate
- Community support (# leaders, communities, people)
- Virality (clear narrative, meme-ability)
- Attractiveness of liquidity mining program
- Management of technical risk (Audits)
We hope you enjoyed this weekly update. We’ll be sharing a comprehensive list of DeFi indicators and what to look for in Defi projects in the coming weeks. Make sure to sign up for the newsletter below and join us on Twitter (@BCComparison) and Telegram (@BCinsights) for more updates & insights from all blockchain ecosystems.