Running out of TIME for a Trip to Wonderland
*Disclaimer: this is not financial advice and should not be viewed as recommendations to buy or sell any asset, this is purely educational and the information below is solely my opinion, please do your own research and develop your own conviction*
A lot of us in crypto like to joke about ponzinomics: the game theory behind DeFi protocols that are too good to be true and immediately grab your attention as a ponzi scheme that is going to bankrupt you in due time.
Projects with strong ponzinomics usually receive negative attention from ordinary users upon their first issuance and find themselves filled with two groups of holders: degens who don’t know any better, and apes who are too far down the rabbit hole to remember their conditioning from traditional finance.
I found myself fulfilling the journey of the latter when I initially denounced coins like OHM because of their ponzi like rewards before fully detaching from the programming and learning to understand their structure, value proposition and long term benefit to crypto. This doesn’t mean these coins aren’t ponzis, but their utility and adoption has allowed them to evolve beyond the ponzi stereotype and into the ponzi meme.
Although I have a position in OHM, I won’t be talking too much about Olympus here, just touching on it briefly for the sake of context and focusing more closely on Wonderland which is @danielesesta’s fork of OHM on Avalanche.
The first time I heard of TIME, I was a little confused as to how and why a 72,000% APY could exist or even be remotely sustainable. But, being that I had been selling off alts left and right and consolidating into an Ethereum position, it was something that intrigued me enough as a high beta, potentially leveraged play on crypto. So I ran the compounding calculator I found online and discovered how ridiculously amazing the ponzi effects were. Aping a few dollars that I could afford to lose completely seemed like a no brainer. But I didn’t understand what I owned and why it could actually be a valuable long term investment until now.
From Olympus to Wonderland
TIME started off as just a fork of OHM, existing as a decentralized reserve currency on the Avalanche network.
Unlike traditional stable coins which are pegged to a dollar while being backed by fiat assets, TIME is allowed to run freely and experience price discovery based on traditional auction market theory and instead is backed by a basket of cryptocurrencies such as MIM, AVAX and TIME-MIM/TIME-AVAX LP tokens.
Decentralized reserve currencies like OHM and TIME get their funding from buying liquidity tokens from holders and offering the OHM and TIME tokens back at a discount. Users bond their tokens for a set period of time and at expiration are able to claim the underlying asset at a discount. The DAO then uses those funds to provide liquidity and capture the fees, issuing tokens to stakers rather than yield vampires who drain pools during liquidity mining programs and exit when the incentives dry up, ultimately dumping on holders.
This is a valuable alternative for DeFi protocols trying to gain traction and create liquidity. Instead of renting liquidity out and diluting holders through emissions, they’re purchasing liquidity up front, creating income for the treasury through the fees collected, and rewarding long term believers of the protocol with the issuance that otherwise would’ve been chewed up and spit out by degenerate farmers who didn’t care about the underlying protocol at all.
OHM first introduced this concept earlier this year and has seen its token grow in value while its APY has slowly decreased with every milestone that’s been met.
TIME replicates the basic tenets of OHM but shifts its focus in a different direction. Whereas OHM has evolved into a pivotal infrastructure play for DeFi by providing protocol owned liquidity services for other projects and networks, Wonderland is focused more on maximizing value and opportunity for holders and builders by becoming a decentralized venture capital DAO.
Currently TIME has $464 million in its treasury. For comparison’s sake, OHM has just over $200 million more in their treasury, despite being around much longer and having partnerships with a variety of other DeFi protocols.
The interesting thing here about TIME, however, is what the money is meant to be used for. At the moment, the treasury backstops the emissions and provides the runway we see that sustains the current interest rate. However, the intentions of Dani and the DAO seems to be more altruistic than some believe.
The protocol prides itself on being an opportunity for people to make money and create wealth, but the emissions aren’t always going to exist, and at some point, the runway will close, the remaining token issuance will be burned, and the DAO will progress upon its next chapter of its existence, which is to function as a VC DAO that owns a gaming studio.
The Future of Frog Nation
Dani has drawn a lot of respect amongst DeFi degens lately, which, in a lot of ways, reminds me of the cult following Andre Cronje had last year.
Whatever project Dani mentions or touches has quickly seen new users flocking to it. I fully expect this meme to continue as Popsicle.Finance comes back to market in the coming days, but I won’t get into ICE too much right now, since this is Wonderland after all.
Frog Nation is the meme that’s surrounding Dani’s projects and the group of people who blindly trust him as they ape into his DeFi protocols. And rightfully so. Abracadabra.Money is an amazing innovation. Magical Internet Money is the most ironic, but brilliant idea in a long time. Wonderland is an insane wealth creation vehicle. Being a Frog is being on the right side of TIME right now, that’s for sure.
But, Frog Nation should know that the fun and excitement directly associated with Wonderland can quickly change based on the DAO’s decisions and desires to evolve.
At the moment, Wonderland is geared toward creating as much value for its stakers as possible while growing its treasury as large as it can balloon. This is the perfect time to be a staker and be along for the ride into Wonderland. Currently the APY is up to 80,000% while the price of the TIME token sits around $7,700. At the current rate of emissions, a $200 investment will yield you six figures in a year if everything hung around here for 365 days.
This is the insanity that drew me in and finally pushed me to the right side of the ponzinomics bell curve.
I obviously don’t expect TIME to continue issuing its supply at this current rate, nor would I expect the token price to remain stagnant, but I do plan on being here for the ride regardless of what happens, and this is why.
At some point, when the treasury is at its desired threshold, the DAO may vote on ending the runway and bringing emissions down to a normal level while burning some extra tokens. This will have an effect where the price of the token may go up because supply suddenly disappeared. At the same time, it could have the adverse reaction where farmers dump since the ponzi yields are no longer present and the allure of the cash train has been abandoned. But regardless of what happens price action wise, it's the usage of the money in the treasury that’s going to be an incredibly interesting development.
The DAO has complete control to vote over how the money is used, but overall, the early ideas look like creating, investing in, or buying a game studio in which the TIME Token would function as the unit of measure, and the idea of funding developers with their own projects with royalties/fees feeding back into the treasury’s wallet.
Both ideas are exciting and altruistic as they would help builders create awesome products without being at the mercy of predatory VCs, and it would increase the utility and tokenomics of the TIME token.
It’s hard to quantify when this may happen, if it was up to Dani, he’d end the runway and burn the tokens tomorrow rather than diluting holders any further. But since the DAO has to vote on things, it’s a debate that will have to be held over some point in time.
Personally, while thinking about Wonderland’s future and its current ethos and mission, I’ve gotten the feeling that there may be three to six months of insane yield opportunities ahead of us. This is no guarantee of course, with just a gut feeling based on my synthesis of the project’s goals and growth, but I imagine a treasury that plans to be involved in game development that wants to fund other crypto projects would probably need closer to a billion dollars in cash under its belt to best prepare for the opportunities ahead of it.
To me, having a billion dollars in the treasury gives plenty of cushion for multiple projects, potential setbacks, and adjustments during a potential bear market. Remember, TIME isn’t backed by US dollars, it's backed by crypto assets like the Avalanche token and MIM (which is backed by interest bearing tokens).
The DAO is currently planning to put some of its treasury to work in a safe and passive way by using the naked AVAX and MIM tokens to earn an extra $1.5 million for the treasury each month. This is a great way to show that Wonderland is for the people and not for the money. Instead of buying yachts, hookers and lambos, we’re seeing the DAO put its money into the crypto ecosystem to continue growing its offerings and value for holders.
Although we don’t know definitively what will happen in the future, whether or not the plans for a gaming studio will fully materialize, or if the APY can be sustained for the magical 365 day period of time that turns everyone into millionaires, we do know one interesting thing that has been developed here by Dani and the Wonderland community, a new concept of money and value is being created.
The Shift in Financial Understanding
When you start off in traditional finance, you quickly learn that anything over 4% is solid (beating inflation). So you subscribe to the idea that dividend stocks are solid ways to preserve your capital.
When you’re young, you’re told to be more aggressive, so you settle for 8-12% gains in index funds plus having some exposure to large cap growth stocks.
But…
As you get deeper into the investing world you start to notice a common theme: the best wealth creation opportunities don’t come from companies paying dividends. Companies at the top of index funds for the S&P and Nasdaq set up great long term opportunities, but they technically underperform or lag their small or midcap high growth peers.
So naturally, you start to dive in deeper and deeper to find the best opportunities. And you learn about monetary policy and the effects it has on valuations and sentiment, and you make a ton of money and quickly see ridiculously large drawdowns of 30-50% from the highs along the way.
But then one day, you start talking to a friend and you hear about crypto and notice something, certain coins are giving out staking rewards with yield opportunities that vastly outweigh a lifetime of gains in the stock market.
So you automatically think it's a scam and a ponzi and a terrible investment idea and you ignore it.
This is all very natural and expected. However, the reality is, we no longer live in the traditional finance paradigm that conditioned us our entire lives. That reality imploded when 40% of the entire USD supply was created during the Coronavirus outbreak. At this point, we have to accept that money and value is no longer viewed or accepted in the same light that we are used to, and therefore, we should assign our understanding of returns and value in a new medium.
For so long we have been conditioned to scoff at anything that seems out of the ordinary, to the point that we ignore interest rates above the Fed's zero risk rate because we are told nothing more can possibly be guaranteed.
But crypto has shown us that anything is possible.
Which is the result of crypto being a completely free and unregulated market without a governing body overseeing it and pulling any strings. Without the fed backstopping crypto, we have team supply/demand metrics, real auction market theory, and real lending opportunities.
When Gemini Earn gives me 8% on GUSD deposits, it’s because they’re paying for liquidity that they can loan out to others. When liquidity pools are incentivizing deposits with 30% APYs, it’s because they’re trying to build an even market.
No one in crypto is giving out free money for no real reason, instead, they’re giving out fair and equal opportunities.
TIME is no different here. I originally ignored OHM because I was in the middle of the bell curve and thought it was an unsustainable scam, but what I failed to comprehend was that OHM was incentivizing me with this yield to build a treasury that can be used to buy liquidity instead of renting it out. Wonderland is the same thing, Dani and the DAO are paying 80,000% APY that’s compounded every eight hours because they’re building the treasury. They are searching for bond buyers, searching for depositors, and in return, they are rewarding believers and yield farmers.
Instead of taking money from VCs and issuing them millions of tokens at allocations under a penny, and instead of having a massive token unlock in a couple of years that explodes the circulating supply from 5,000,000 coins to 50 billion, so that the team and VCs can dump on unsuspecting retailers, they are buying your liquidity and inflating the token to reflect the treasury’s growth, which is a great alternative to predatory deals with VCs who are only there to drain the swamp financially.
Rebase coins like OHM and TIME are democratizing finance, giving investors the ability to benefit from the rise in supply, rather than be ruined by it. Whereas dilution and inflation destroy value, expansion leads to financial and economic growth. Since these coins are starting with small supplies under 300,000 coins and growing proportionally with the treasury and the bonds sold, they aren’t destroying token holder value, they are only broadening the scope of it.
This is why OHM has lowered its interest rate to 8,000% and plans to cut it again to 1,000% in January, and why Dani has floated the idea of killing the runway and burning tokens to preserve the current value of the coin. When the desired threshold is met, the best projects and communities willingly step in to lower the expansion mechanism and normalize the ship before control is completely lost.
The Fundamental Flaw with Forks
While Wonderland is most definitely a fork of Olympus, it exists for a reason with an end goal. The concept of TIME isn’t to print money forever and grow a never ending treasury at the expense of holders, it has plans to disrupt the old guard through the use of its capital.
Unfortunately, when a project sees immediate success and attention, it is vulnerable to copy cats with impure intentions. This has led to the recent rise in forks of OHM and TIME like Spartacus.Finance, Snowbank and Euphoria, amongst many others, that haven’t developed the same long term goals or desires, or provided holders with any real roadmap or plan for the future.
Although these could be good opportunities for a trading, following the wave of FOMO that pumps them up, they haven’t shown to be rewarding for holders who remain involved beyond a bonding period.
Users should be careful when navigating forks like this that do not come from teams with a previous track record of success and respect in the crypto industry, or teams that do not have a general plan for when the runway will be turned off, or emissions will be wound down.
Control over the treasury is also imperative as rebase projects like this should be completely decentralized and DAO run, not up to the mercy of one individual who has complete control of the funds through an admin key.
Users should also take into consideration the bonding discounts, if they are dramatically larger than the current 5 day ROI period for stakers, they are likely to see those coins hit the open market upon the unlock and dilute the price of the token.
If a project has no plans for its treasury, no real goals for what it wants to accomplish long term and its team is either fully anon and missing from Discord, or not actively building, it might be best to scalp the journey or avoid the ride, rather than dive into it heavy handedly and expect the same sustained success that TIME and OHM have experienced.
I do think we can see new projects emerge using these rebasing and protocol owned liquidity mechanisms in the future to create a treasury that funds their project’s mission and ethos as opposed to going the traditional VC route, this could become a new, exciting form of crowdloaning that democratizes finance and gives unaccredited investors the ability to participate in potentially outsized gains that only institutions have available to them, but as always, it will come down to planning, reputation and execution. Without the proper planning, without the reputation or consistent appearance in the community, it is unlikely that any real execution occurs, and doubtful that we see success over the long haul.
The future of finance is definitely evolving, as is the ability to create and establish value through new methods governed by communities and code, rather than the select elite. Protocol owned liquidity projects can become the new forms of funding for the world, but it might be a while before the opportunists are washed out and shuttered away.
Anything can happen to Wonderland, a security exploit, a rug pull, a complete and utter failure to execute could destroy its entire reputation, but, at the moment, we are witnessing a completely altruistic opportunity to grow a treasury that benefits the community and potentially the entire Avalanche ecosystem.
The world we know no longer exists, but the new paradigm being built is one we should consider exciting and financially rewarding. I currently have a position in TIME and OHM and am looking forward to seeing how they grow and deliver on their mission.
As always, none of this was financial advice, crypto is risky, trading is risky, and the world ahead of us is a winding road that can very quickly lead us off a cliff if we’re not paying close attention.