DeFi x NFTs = NFTfi

Three tokens leading the DeFi x NFT Crossover

This week’s Token Tuesdays comes as a special edition. Three tokens in one article!

While everyone has their eye on 10,000% APY’s, I’m setting my sights on new sectors blossoming under the radar.

NFTs - or non-fungible tokens that are verifiably unique from one another - are starting to see token economies emerge to bet on their collective upside, rather than the price of a single token.

While the notion of digital art, collectibles, and land are commonly touted as the pillars of the NFT ecosystem, a few notable projects are starting to bridge the gap with DeFi and the popular narrative of governance tokens.

This is. NFTfi.

Aavegotchi - GHST

As a crossover between Aave and Tomogotchis, Aavegotchi’s are digital pets fused with interest-earning aTokens. You can imagine Axies or CryptoKitties, but with aDAI underpinning each creature for a stable, passive value base.

Users can collect Aavegotchis and level them up to equip different wearables and compete in select challenges.

This week, Aavegotchi rolled out its governance token - GHST - utilizing a community-centric bonding curve that rewarded early contributors with priority access.

What’s unique about GHST is the DAICO model being used to allocate funding. The 11M DAI collected from GHST sale is routed to an AavegotchiDAO, governed and distributed by GHST holders. The core team is currently requesting just 50,000 DAI per month, used largely for community growth campaigns preceding the official launch.

With a diehard community and a blossoming governance token, GHST is showing strong signs of leading the NFTfi movement.

Rarible - RARI

As a rising NFT marketplace, Rarible has been turning heads with its innovative tokenization opportunities including yNFTs - or NFT-based insurance covers underwritten by Nexus Mutual.

Rarible distributes governance tokens using ‘markeplace mining’ in which 75,000 RARI is allocated each week evenly between buyers and sellers.

While the project suffered from a streak of wash trading in the early days, it’s since turned to governance to help address this issue through the inclusion of commissions for buyers and sellers on each marketplace transaction.

In its current form, the 2.5% commission to buyers and 5% commission to sellers will be routed to a cold storage wallet owned by the core team, rather than being governed directly by RARI holders.

SoonTM, this will be handed over to a Rarible DAO. Still, the inclusion of incentives to sell NFTs is the first in a blossoming market and one worth keeping a close eye on in the coming months.

Meme Protocol - $MEME

What happens when you combine liquidity mining with legendary NFTs? You get Meme Protocol. Here’s my story on what you need to know.

After spinning out of a degenerate Telegram group, Meme has created one of the most creative forms of liquidity mining to date.

In short, users stake MEME to earn non-transferrable pineapple points. Those pineapple points can be used to mint NFTs of varying rarities, capped at a fixed supply.

This week, the first set of legendary NFTs were minted, selling at a market value of 7.7ETH and then reselling at 77ETH. What happened next speaks to what I’m excited about the project.

With a blossoming ‘citadel’ backed by an ambitious roadmap to give Meme NFTs more utility, it feels like MEME is one of the most organic governance tokens out there.

Flying under the radar at a sub $10M cap, I’d expect the protocol to see a lot of attention if it’s limited edition NFTs continue flying off the shelf as they have to date.

NFTfi Shines

Outside of the three tokens mentioned above, the trend of governance in the NFT sector is one that will only continue to grow in the coming months.

While it’s clear that many NFT projects need to do some catch up to compete with the top token models we see in DeFi today, this trend is a strong signal for anyone looking for a hedge against yield chasing.

For me, the crossover of creative onramps fused with DeFi primitives gives Ethereum-based assets a whole new meaning.

Be sure to stay tuned as I’ll be diving into the growing sector of social tokens next week ;)

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Disclaimer: All information in this newsletter is purely educational and should only be used to inform your own research. Token Tuesdays does not offer investment advice, endorsement of any project or approach, or promise any outcome. This is prepared using public information and does not account for anyone's specific goals or financial situation.

The Rebirth of bZx Protocol

Exploring bZx's relaunch and the case for BZRX

Yield farming is all the rage.

Every project is now incentivizing liquidity and this trend is only going to get 10x more competitive in the coming months.

However, there are a select few projects approaching token distribution and liquidity mining in a sensible fashion. One of the biggest things missing from this new wave is a lack of focus on security and long-term sustainability.

To this end, we want to spotlight bZx Protocol - a financial primitive for shorting and lending behind Fulcrum and Torque.

bZx is fueled by a native token BZRX which made a big splash in it’s Initial DEX Offering in July. While talk of the token has somewhat died down in DeFi circles since the launch, we’re here to shine a light on why the token has grown steadily since distribution and how the upcoming protocol relaunch is poised to capture a new wave of value for protocol users and tokeholders alike.

Special thanks to bZx for sponsoring this post to make it free to read!

Token Picks are normally for subscribers only, so be sure to sign up for articles like this delivered right to your inbox every Tuesday!

The bZX Ecosystem

bZx currently offers two flagship products:

  • Fulcrum - For tokenized lending and margin trading

  • Torque - For fixed-rate loan origination

Users can lend any crypto asset, more in line with Aave’s wide-set approach than Compound’s conservative listing strategy. The ability to take out leveraged positions like 3x longs on supported assets offers another layer of composability for traders to collateralize positions with extra leverage.

This goes to show that bZx is more than just a lending protocol, and is one which is likely to add more products to its stack in the coming months.

Back to the Drawing Board

It’s tough to discuss bZx without shining light on the attacks that plagued the protocol in February. While we won’t go too deep into this, the protocol suffered serious losses which have resulted in the inability for users to borrow or trade over the past 6 months.

What’s worth noting is that bZx compensated every affected user out of pocket, along with a buyback program for iETH LPs who faced illiquidity following the protocol being restricted.

Now, bZx is gearing up for a relaunch that has undergone extensive auditing. This includes a lean, elegant product experience that is twice as efficient on gas costs.

Here’s what you need to know.

bZx Revamp

The relaunch of bZx will feature a new and improved Fulcrum 2.0 along with an updated version of Torque featuring Flash Loans.

Alongside the protocol upgrade are new incentives and features like:

  • Sustainable Yield Farming

  • Collateral Management

  • Gas Token integration 

  • Order Histories 

  • Liquidation Engines

The takeaway here is that the protocol will become drastically more efficient, opening up value capture mechanisms to both arbitrageurs and tokenholders alike.

Why BZRX?

Outside of the classic DeFi narrative of earning tokens for using the product, bZx’s approach to liquidity mining feels much more sustainable.

“Each time a user pays a fee, 50% of the value of the fee is refunded to them in the form of BZRX.” - BZRX V3

This rebate-like model is drastically different from other liquidity mining opportunities where users earn exponentially more in token value than the amount of fees paid to the protocol. This is why Compound recursive lending + borrowing has gotten so extreme. Borrowers literally make a profit for spinning their assets to harvest governance tokens.

“The bZx protocol is taking a slightly different approach by directing rewards toward active users”

With this model, oracle-based pricing makes it so that liquidity mining is not exponentially profitable, rather a sustainable means of only distributing tokens to those adding more value to the protocol.

Taking a quick look at what these fees are:

  • Origination fee: 0.09%

  • Trading fee: 0.15%

  • Interest fee: 10% of interest paid

As fees are accrued by the protocol, half go towards the DAO while half go towards an insurance fund until the DAO decides otherwise.

These conservative rebates come in tandem with an attractive boostrap period in which 0.5% of the BZRX supply will be released per week based on the quantity of fees generated for that week.

A total of 2% over the first four weeks, giving BZRX farming a competitive advantage over a project like Balancer in which only 0.145% of tokens are released each week.

BZRX Staking

For BZRX token holders, collecting fees is as simple as staking to the DAO via the Staking Dashboard. More on BZRX staking here.

What’s unique about bZx staking is users can enter the DAO with three different assets:

  • BZRX - Vanilla tokens with 1:1 voting

  • BZRX LP/BPT - Liquidity positions in BZRX-based pools on Uniswap and Balancer

  • vBZRX - Vested BZRX representing a claim on underlying BZRX

This dichotomy of staking provides flexibility for every ecosystem actor to participate, something which many projects ignore when considering how investors and LPs are able to dually capture the upside of the project’s growth while adding value in other areas.

Alongside the dashboard is a handy Staking Calculator, allowing users to track their monthly cash flows in different situations.

BZRX holders can also redeem their tokens for insurance, a direct benefit of the protocol being battle-hardened to deal with crisis-level events.

The Case For BZRX

In recent weeks, the price of BZRX has been steadily climbing in anticipation of the protocol relaunch.

We expect that the introduction of sustainable yield farming in tandem with a growing treasury will make bZx one of the more consistent players in the rising degen landscape of DeFi meme coins.

Having undergone a crisis type event, we can rest assured that bZx is taking security extremely seriously, a major win in the land of unaudited smart contracts rising today. Backed by community insurance and a well-thought-out governance schema, we expect BZRX to quickly find its footing in an ever-growing DeFi landscape.

With Aave just today topping the DeFi Pulse leaderboard, a community-operated lending, margin and borrowing protocol has endless upside in the midst of a DeFi bull market.

To stay up with bZx, be sure to follow them on Twitter!

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Disclaimer: Fitzner Blockchain is long BZRX. All information in this newsletter is purely educational and should only be used to inform your own research. Token Tuesdays does not offer investment advice, endorsement of any project or approach, or promise any outcome. This is prepared using public information and does not account for anyone's specific goals or financial situation.

Yam.finance

YAM has taken DeFi by storm. Here's why.

Hop on Twitter and all you’ll see if one emoji - 🍠

That’s right, we’re talking about Yams. As in Yam.finance. As in YAM tokens - 0 intrinsic value, meme-coins.

Just when you thought yield farming couldn’t get any crazier, the sector is now on X games mode.

Here’s what you need to know about DeFi’s latest farm.

*You’re reading one of our free pieces. We drop an article like this every Tuesday, however only paid subscribers get access to all of them. For $5/mo, the amount of alpha to be gained is simply unparalleled.*

Note: YAM contracts are currently unaudited. What we’re about to discuss is extremely risk and about as far down the DeFi rabbit hole as you can go. Proceed with caution and be aware that we are in uncharted territory.

What is YAM?

What happens when you combine a YFI-like no-premine, no ICO, equitable distribution with Ampleforth supply rebases which drove AMPL to be the most liquidity pool on Uniswap? You get YAM.

YAM is the governance token of Yam.finance - a platform with no purpose other than to farm YAM by staking popular DeFi tokens. 10% of the daily rebase is used to purchase yCRV (interest-earning stablecoins) and seed a yield farming treasury.

There are currently 8 Yam pools, each featuring 250k YAM in rewards over the first week. These pools are COMP, LEND, MKR, SNX, LINK, YFI, WETH and ETH/AMPL LP tokens. Users simply stake any of the tokens above, and earn YAM in return.

For our YAM farmers out there, here are some good tools to keep track of yields:

  • https://yam.tools/

  • https://yam.zippo.io/

Underpinning YAM are rebases every 12 hours, meaning the supply contracts and expands by trying to reach a $1 peg. This phenomenon is what drove AMPL’s marketcap by more than 500% in the past month once 4chan got wind of being able to hold extra tokens earned from rebases.

Why YAM?

First things first, the Yam team very blatantly states that YAM has no value. Right now, you literally can not use it to do anything. The goal is that this change with governance, but this is purely a meme-driven opportunity.

Just like YFI (which also stated it has 0 value), this doesn’t seem to be stopping anyone from farming.

The supply of YAM is initially set at 5M tokens, split as follows:

  • 2M to YAM farmers over the first 7 days

  • 3M to YAM LPs for the yCRV/YAM Uniswap Pool

As capital rushed in to be the recipient of the earliest yield, other tokens are getting caught in its wake.

COMP - Yam’s most profitable pool - is now up more than 30% on the day as farmers race to farm yam.

Tomorrow, the YAM/yCRV liquidity pool will open with another wave of degens.

At this point, all we can say is either watch in amazement (or disdain) or try your hand at farming with the full intent that you literally putting all of your capital on the line.

YAM-Rush

To synthesize, YAM’s potential is simply unpredictable. While it lacks the X factor that was Andre with yEarn and YFI, the DeFi-native creators of YAM have certainly captured the sector’s attention, and many are likely to follow suit.

This rise of YAM comes in tandem with meme-driven tokens like Tendies (TEND) and Taco Coin (TACO) both of which tie in novel DeFi primitives with a cheeky name to really fuel the meme-driven nature of what crypto is best known for.

Regardless of if you grok this, at least now you can say you’ve heard of YAM. If you’re lucky, maybe you’ll even harvest one from the digital fields.

Until next week, good luck with your honest work!

Disclaimer: YAM is extremely risky. We do not recommend new readers go anywhere near YAM. This is meant for highly knowledge participants and even they are having trouble understanding this. Please DYOR and never invest more than you are willing to lose.

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