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My Chads, it's been a crazy day in which $ENCORE launched. 8618 ETH collected. A bot became a millionaire. Contracts paused. A buggy website. Before we talk about $ENCORE, we first need to understand $CORE and it's interesting features.
1/ $CORE has done a x100 and has taken the industry by storm. Why? Because it provided a twist to the Yield Farming craziness. Traditionally, in projects like SUSHI and CRV, LP holders were rewarded by minting tokens which resulted into sell pressure due to inflation. See charts.
2/ $CORE instead is non-inflationary and its yield for LP providers comes from REAL activities. Which ones?
A) Transaction fees
Each transaction of CORE token has a 1.1% transaction fee of which 91% goes to CORE LP holders.
A) Transaction fees
Each transaction of CORE token has a 1.1% transaction fee of which 91% goes to CORE LP holders.
3/ B) Yield from automated trading strategies
Like $YFI, $CORE will have Vaults in which people can deposit e.g. ETH, USDT, DAI. The funds will be used for automated trading strategies, which yield will be used to market-buy $CORE tokens.
Like $YFI, $CORE will have Vaults in which people can deposit e.g. ETH, USDT, DAI. The funds will be used for automated trading strategies, which yield will be used to market-buy $CORE tokens.
4/ The market-buy of $CORE by the Vaults will result in buy-pressure. However, one thing to note is that as a yield farmer you generally sell your yield (in this case $CORE) and this will likely result in similar sell-pressure as well, resulting in a net-zero effect. However:
5/ The subsequent selling of $CORE will result in transaction fees (see A above). Therefore even if all $CORE is immediately sold by the yield farmers of the Vaults, it will still result in transaction fees (and therefore value) for $CORE LP holders. Pretty cool feedback loop.
6/ Another interesting twist of $CORE is that once liquidity is provided, it cannot be withdrawn again. This will mean liquidity is locked forever. Only the LP tokens received for providing liquidity can be traded.
7/ The combination of liquidity locked and Vaults, can result in interesting trading strategies that Vaults can perform to generate yield. I talked with the core dev of $CORE and it's too detailed for a tweet, but here's a very short summary:
8/ A. One-sided liquidity provision
Pools (Core/cETH and in future more pools, e.g. Core/cUSDT) can function as on-chain oracles, users can deposit e.g. ETH, which will internally be paired with coins from other pools and e.g. provide liq to UNI pools without impermanent loss.**
Pools (Core/cETH and in future more pools, e.g. Core/cUSDT) can function as on-chain oracles, users can deposit e.g. ETH, which will internally be paired with coins from other pools and e.g. provide liq to UNI pools without impermanent loss.**
9/ B. Arbitrage/Flash loan strategies
Funds in the Vaults can be used for arbitrage using the the on-chain price oracle derived from the Pools and provide Flash loans.
Funds in the Vaults can be used for arbitrage using the the on-chain price oracle derived from the Pools and provide Flash loans.
10/ So ehm Chad, is this a ponzi? Yes and no. On the one hand, these feedback loops result in an upward price pressure which seems very ponzi-like. On the other hand, there are real activities underlying the fees and yield.
11/ The main thing that in my view will determine whether this has long-term perspective is how much yield the strategies in the Vaults will generate. The transaction fees are a by-product of the strategies yields and volume, and therefore cannot be the sole source of value.
12/ If the automated trading strategies are good high yield generating strategies, $CORE can have sustainable value. The combination of locked liquidity, the transaction fees, and Vaults is interesting, and I'm excited to see how the trading strategies will look like and perform.
13/ So now that we understand $CORE, let's talk $ENCORE.
$ENCORE is a fork of $CORE and copies everything that $CORE does. Is this bad? Not necessarily, YFII did a x50.
$ENCORE is a fork of $CORE and copies everything that $CORE does. Is this bad? Not necessarily, YFII did a x50.
14/ $ENCORE has collected an incredible amount of 8619 ETH during its initial liquidity event. What's even more impressive, is the amount of FUD it has collected. We rarely see such FUD with a project. Chad impressed.
15/ Let's highlight a bit of the FUD.
- The main dev is a 14 year old person.
- The main dev has some questionable activities in the past:
https://github.com/1AndOnlyPika/EnCore/pull/1
- Main dev asked basic code questions on SO.
- There was some FUD regarding bugs in the contract, but seems fixed.
- The main dev is a 14 year old person.
- The main dev has some questionable activities in the past:
https://github.com/1AndOnlyPika/EnCore/pull/1
- Main dev asked basic code questions on SO.
- There was some FUD regarding bugs in the contract, but seems fixed.
16/ As far as I can tell, and $ENCORE dev confirmed, $ENCORE has no differentiating features from $CORE.
It's a fork.
Therefore, like with $CORE, the main thing which will determine the long-term success is how good the trading strategies will be of $ENCORE.
It's a fork.
Therefore, like with $CORE, the main thing which will determine the long-term success is how good the trading strategies will be of $ENCORE.
17/ Whether you believe $CORE or in $ENCORE will therefore be a bet in which team you believe will have the best ideas for trading strategies, execute the project, and gather a community.
Is it the original $CORE team?
Or the fork team?
Place your bets accordingly.
Is it the original $CORE team?
Or the fork team?
Place your bets accordingly.
18/ It will be interesting to see how $CORE / $ENCORE will evolve. $YFI started as a yield aggregator, but turned thanks to its incredible community into something greater, with many parts forming its ecosystem. Lets see if $CORE / $ENCORE develop similarly, or end up a ponzi.
19/ ** in 8/ Similarly Bancor V2 and Chainlink try to tackle the impermanent loss problem through amongst others oracles. See for an understanding: https://medium.com/@finematics/what-is-bancor-v2-chainlink-integration-and-dynamic-automated-market-maker-explained-2104049f7e73
Note: Just to be clear, I find $CORE / $ENCORE interesting experiments. I have no opinion on the current prices and whether it's high or not. I do not endorse or condemn CORE / ENCORE, but am excited to see what they will bring to the table.
