My previous few posts are about "yield farming" or "liquidity mining", which deal with helping companies to bootstrap liquidity for projects that are up and running, and in most cases have a track record. In return, you earn rewards which can be quite lucrative in some cases (net of the research time and high network fees). This particular post is more about earlier stage and smaller startups, which are speculative, and so there is more risk involved. But the higher risk comes with more potential return. So, you have to be careful, and do your due diligence. The danger in this type of investing is getting back to the ICO days of 2017 when people were making crazy investments with little more than an idea or whitepaper and a lot of promises. Of course, there were a lot of scams. That's why its important to look for strong fundamentals, and ability to deliver, before even considering the ability to create marketing hype (Pumpamentals- a term "coined" by Richard Heart).
With that warning, here are the Top small/microcap altcoins that I feel have sustainable potential for the future. Since they are still new, there is a chance for high gains and large % increases (ex.10-100x). But keep in mind there is also higher risk since they are “early stage”, and there isn’t as much objective historical data to analyse. So in most cases we have to look at other metrics like project team, results of testing, roadmap, the app UI and ease of use, sustainable yields, narratives and memes around the project, the community, marketing, partners and investors etc.
Market Cap -$9,653,454
This is the governance token for Yearn.finance. The project is in the process of decentralising governance. They have re-branded from an older project called “iearn”. Trading volume is very high, and circulating supply is very low (only 8k of 30k to be issued) So, they are very short in supply and the demand is high right now. They are taking advantage of yield farming to create economic incentives, and have excellent integration with other key defi projects. (Curve, Balancer, Aave, Compound) to maximize returns, and minimise gas costs. The developers have a good track record with the iearn rate aggregator project which has been earning high yields for over a year, when combined with their curve.fi integration. PE ratio will be good since earnings will be very high, so it is sustainable.
Risks - price of YFI is already very high, so there might be a correction coming. There are also risks of over dependance on the key founders in the short term. But the new system of governance will mitigate that risk. There are also potential smart contract bugs since they are not yet battle tested. The contracts are Opensource (on github), but not yet audited, as far as I can see.
This coin (YFI) has been rocketing up the charts since it was introduced last the week-end. It has gone from 0 to $1,289 in a couple of days (must be a record). The founder Andre Cronje is very popular with the community, and his experience with financial engineering and yield farming is legendary on the twitter cryptoverse. This project has become known as the best defi aggregator to maximize yield. They have been able to get higher rates than all the other players, which is very important to both retail and enterprise investors. I expect this to continue into the future, since they are very innovative and know how to adapt to new situations, and opportunities.
There is a lot of media coverage in the defi news. Here is an example of a very good article that covers YFI. The founder has a reputation for getting things done very quickly with very few resources. The decentralisation of governance will reduce the risk of dependence on very few/smart people, which was a potential weakness in the past.
Market cap - not yet listed ($0)
Curve.fi is similar to Uniswap, but it is optimized for the most popular stablecoins and BTC derivatives, like RENBTC and WBTC. They make use of customized algorithms for bonding curves, which automated market makers are based on. CRV tokens will be used for voting and governance. Here are the details from the curve project which lays out how the process will work. The Curve Decentralised Autonomous Organization will be with built with the Aragaon project tools for creating DAO’s. Inflation will initially be low, and controlled by the Decentralised governance. Fees come from liquidity and transaction volumes which are very high, and setting records, especially with the release of the YFI coin (see above). They are becoming one of the fastest growing, and most important players in the Defi market, and moving up in the defipulse rankings, currently at #5. They are coming close to overtaking centralized exchanges like Binance, and Bitfinex. This is a major milestone for the defi market space.
This token is ready to explode as soon as it goes live, since there is a lot of anticipation from the community. They have extremely good partnerships with other platforms such as Synthetix and iearn (see above YFI coin). They have been able to build a product and community with good market fit, which they need to compete with the large players like Uniswap and Compound. That is what makes them special. They have grown very fast in a short amount of time, as more people find out about them, and the community becomes more decentralised to reduce centralised points of failure. For the first time investors are able to earn yield on their BTC while they are HODLING, and waiting for BTC to appreciate in value. The value of BTC on the Eth platforms like curve.fi is growing exponentially for this reason. This is a game changer.
They have a proven track record of over 1 year without any security issues. The smart contracts are Opensource (on github), but have not been formally audited, as far as I can see.
Market Cap -$12,562,759
MTA is the governance token for the mstable.org, (musd project). They are allowing you to hedge risk from the major stablecoins (Dai, USDT, USDC, Tusd) by combining them into a single “meta stablecoin”. This will bolster the reliability and stability of musd to reduce risk of failure of any individual stablecoin. They will be doing the same thing for other digital assets like mBTC for example. It is possible to earn very high interest rates by depositing coins in their minting/saving platform (currently over 30% APR), but not sure how sustainable those rates will be in the longer term. You can earn MTA governance tokens by contributing liquidity to one of the Musd Balancer pools (as well as earning BAL governance tokens at the same time). Inflation rate and share of earnings for the MTA token holders will be voted on by the community. PE ratio is not yet on token terminal, since there isn’t enough history data yet (like for many early stage projects). This coin has been going up in value since it is a governance token, and not pegged like a stablecoin. (21.5% over 24 hours). There is not enough data for 7 or 30 days yet.
There is a lot of coverage in the cryptoverse, and it is quite positive. There are many stablecoins out there, but they don’t really compete with this “metacoin”. They are differentiated by branding themselves as a “meta” stablecoin, rather than picking algorithm based, or collateral backed approaches. They combine them all. This space is still wide open, and has a lot of potential to grow in market cap since it is very new. They are also making good use of “yield farming” incentives which is very hot right now. They have some good partnerships, as well as a good team. The UI is very attractive and easy to use.
Market Cap - Not yet listed ($0)
This project is branded as “Non-custodial mimetic trading for synthetics”. It is similar to the Token Set protocol project, except that it is designed specifically for trading synthetic assets (synths). It also borrows some interesting concepts from Balancer.exchange and is truly innovative in the defi space. There isn’t a lot of fundamental trading data available yet, since it hasn’t gone live. Dhedge is supported by some of the biggest names in crypto, including Framework Ventures, Three Arrows Capital, BlockTower Capital, DACM and Maple Leaf Capital. According to the announcement “With Synthetix’s zero-slippage trading model and expanding group of listed assets, dHedge is creating new ways to use the derivatives liquidity the Synthetix protocol enables — the most innovative DeFi platform and community globally. DHT is dHedge’s native governance token and will play a key role in both bootstrapping the platform and its decentralisation.”
It is powered by the Synthetix project, which already has huge respect in the defi community for being innovative and reliable, and has a proven track record. The project was just announced today, and there is already a lot of excitement. They have a great team, and great gamified marketing. I expect this coin to increase in price as soon as it is released into the wild. They are promoting the announcement with a big trading competition. Winners can win DHT tokens for their efforts. They are backed by some big players in the venture capital community. In the traditional market, derivatives trading is a multi-trillion dollar business, and so it has a lot of potential, even if it doesn’t capture a large share of the market. At this point, they have the most experience in this aspect of defi, combined with a first-mover advantage since there is no formidable competition yet.
Market Cap - $16,961,601
This project is interesting because they are one of the few dapps to handle practical transactional use cases. For example, they are going to be delivering an app for timed distribution of payments, which could be used for subscriptions or payments to contractors for example. No one else is doing this yet, and it has practical/real world uses. They have already issued a lot of tokens, but the marketcap is low, since the price is low, and they intend to burn some. The founder is fairly well known since he has proven himself on another project called Uptrennd. But a social network modelled on reddit, is quite different than a transactional system which must be more reliable since there is money involved.
The tokenomics are as follows:
- Every transaction paid in SWAP rewards stakers and liquidity providers with 80% of the transaction fee. 10% is burned, and 10% goes to the foundation
- 10% of SWAP used as transaction fees for services offered by TrustSwap will be burned. This decreases the total supply of SWAP, thus increasing the value of each SWAP token
- 100,000,000 SWAP tokens will start as the initial supply. This will gradually reduce as tokens are burned with each transaction
- TrustSwap fees are reduced by 50% when using SWAP tokens
So the system is designed to be deflationary, and there is an incentive to HODL the tokens, and reduces selling pressure
One of the risks is that they will be competing with established centralised database/web2 systems that are already up and running live, are well tested, and have marketshare. They will have to offer features that make innovative use of Web3 capabilities that can’t be found in current systems or considerably reduce friction and costs. Another risk is that they won’t deliver on their plans, as per the roadmap.
It is being advised, and promoted by Ivan Lilleqvist From Youtube channel Ivanontech) who is a big influencer in the crypto space. Also Michael Gu from the Boxmining channel is friends with the founder, and has been promoting them as well. So, they are getting a lot of atttention. But now they have to start delivering on some of their promises. So, I would start testing the dappps as soon as they have test versions available.
Market Cap $5,311,676
They are developing an easy and convenient way to allow you to stake multiple coins, with a fixed return. So, you dont have to worry about things like validator nodes, slashing rules, and staking minimums in order to earn returns from staking. Similar to Compound, but for staking instead of interest, or an alternative to liquidity providers like Uniswap or Balancer. As per the project site"Instead of trading or risking assets, users choose to lock (stake) their tokens for a specific amount of time." and "XIO is a cross-staking protocol powered by $XIO: an interest governing utility token. Through the decisions of Citizens, tokens are distributed to startups that supply the protocol." They plan to take a share of the staking fees, which will go to the Xio treasury and token holders/stakers. The Xio token will also be used for governance, so the token holders can vote how much of the cash flows they will be entitled to. Their main competition will be the existing staking validators like staked.us, and figment networks and others who already have portals and are already established, but more for corporate use. So, they will need to target retail investors, and ease of use.
They are creating early interest and attention with their citizenship program and "early access". Staking is becoming very popular now, especially with Ethereum delivering 2.0 with their proof of stake model to the broader public. . Many other coins are already using this consensus model. (like Tezos, Cardano, Cosmos, Polkadot etc.) So, the "staking" meme is on their side, and growing into the mainstream. Governance tokens are also hot right now.
Risks - they will need to get the major staking coins to adopt their platform, in order for the coin to be valuable. They need to deliver a good product which is easy for the users, but also accommodate the various protocol developers.
Market Capt -$10,104,977
This is the new DEX, cross platform trading platform for Elrond Chain, which is very hot right now, and launching in a few days. The Dex model has been proven on the Eth Defi platform, and are growing like crazy. They are rapidly catching up the to centralised like Binance and Coinbase. You can trade directly from your non-custodial wallet, and there is no KYC red tape to add friction. But the Dexes on Eth have hit a plateau, since the network is getting bogged down in high traffic, has become very expensive, and only supports Eth ERC20 tokens. Orion and Elrond has the potential to take this to a whole new level, since it is much faster, and cheaper, and interoperates across chains. These are huge advantages, assuming they can pull it off. The tokenomics are listed here.
Elrond currently has a lot of hype right now, and is going live very soon. They have a whole ecosystem of profile partners who have been building on their platform. Their market value has been exploding, but the price and market value are already too high and I don't think they are sustainable. But Orion is still low, many people don't know about it yet, and I think that it will be a key part of the Elrond Defi space. Orion will have an important role as a, cross platform DEX, and liquidity aggregator. So, I think that this one could be a great opportunity to get in early. I have signed up for their beta testing, and am very anxious to try it out.
PLT (Plutusdefi.com governance token)
Marketcap - $0 - Being introduced on July 27
The best way to describe this project is a full stack defi platform with privacy built in. This is what differentiates it from other defi platforms which aggregate a number of defi services together and present them in one place for the user (like Yearn, or Idle.finance, or Acropolis, or RAY Robo adviser from staked.us) So they will have competition from other defi aggregators, but none of the others use aztec protocol for anonymity. Here is a description from the web site: The Plutus Ecosystem:
- Lend & Earn
A simple lending solution that lets you earn up to 15 % APR interest, with full control and non - custodial ownership on your crypto assets.
- Payroll & Payments
Distribute tokens to employees, contractors, customers, investors and communities at a click of button; without technical experience.
Utilise and execute DeFi derivatives instantly with full transparency across your open trade positions.Hedge and manage risk.
Integrate our smart contracts into wallets, exchanges, institutional dark pools and other service providers, whether front - end or back - end.Plutus builds bridges between pockets of liquidity with DeFi.
There are 120,000,000 tokens and these are the uses: Burn, Bonding and Governance, Network Fee, Staking.
Risks - a high percentage of the tokens have gone to private investors, in the initial seed round. (42%) so this can lead to centralisation in the governance and decision making, and distribution of earnings. And some tokens are locked up with employees and advisors for a period of time. So only a minority will be issued to the public. So, the potential gain in price value isn't as large as some of the other projects. They also have to be able to attract 3rd party services to integrate with their protocol, with the SDK.
Defi aggregators are extremely hot right now since they provide higher returns than simply using individual services like Compound or Aave. The aggregation services also reduce gas costs by batching many transactions on behalf of users. This a major benefit as gas costs are extremely high right now. Also, privacy is a very popular issue right now (ezx. social media collecting private data) so they should benefit from the privacy narrative.
The fact that they are decentralised ensures that the token holders will vote to provide cash flows to the investors (like dividends). They have some good partners like Nexus mutual (insurance), Aztec (privacy), Tor, OpenVPN etc. and some good investors like Obsidian Capital, and many others listed here. They also appear to have a strong team, and are active on social media. There are also some competitions to attract users.
Market Cap ? (TBD)
Sora is a parachain in the Polkadot ecosystem. They are hosting the new Polkaswap DEX platform which looks really interesting. It is similar to Uniswap, bit will also work across blockchains, which Uniswap cannot do, since it is limited to the Ethereum ecosystem. It is also much faster, and will have lower fees. Sora has its own ecosystem for building projects, and the community votes on which ones they like the best. Here are some of the usecases. The tokenomics are a little different, and not fixed:
"The goal is to create a decentralized and rational world economic system where everyone is incentivized to participate in funding productive uses of capital that create new goods and services. In real economies you need more units of currency at some times and less at other times, so having a fixed emission schedule leads to suboptimal outcomes that can't compete with centralized economic systems. That is why XOR has a dynamic supply of tokens for the Sora DAE; new XOR tokens are minted for successfully voted projects and unneeded XOR minted for projects will be burned." "The next release of tokens will be the XOR minted for projects that have been voted on and passed (but only as requested by the projects)."
To get some Xor - You can currently buy XOR on Uniswap (link) or earn it through downloading the app and participating in the voting process. They currently exist as erc20 tokens, but you will be able move them over to the new chain with their interoperability bridge. Further details - The whitepaper isn't available yet.
There is a good video on the Chico crypto youtube channel which talks about this project. Sucesss will ultimately depend on the success of the Polkadot ecosystem, which is still in the early stages but is getting a lot of attention looks very promising, since it offers very good speed, interoperability, and decentrlization. It is progressing at a pretty rapid pace relative to Ethereum 2.0. They are not looking to compete with Eth, but complement it and work together. This is a very good strategy, since Ethereum has by far the most dapps, a vibrant Defi ecosystem, developers and network effects.
Marketcap - $20 Mil.
Cross platform Defi aggregator and stack. Interoperates between Ethereum and Polkadot. Interoperates with other existing, established Defi services like Compound, Aave, Maker, Curve etc and is also building a bridge to Polkadot and their growing ecosystem. They also have their own native Defi services called Sparta and Delphi. The main advantage over eth based platforms is scalability and also diversification. They will have staking, and decentralised governance/voting portals.The project looks very ambitious, and interesting to me.
"We allocated half of the Foundation tokens or 20% of total token supply (TTS) to liquidity mining incentives, which you can see on the chart in pink. Team tokens unlock over the next 24 months on a monthly basis and represent a minor part of the TTS. Thus, the circulating supply of AKRO reaches 100% by summer 2022. For full details, please see our transparency disclosure at Messari. The details of our liquidity mining incentives will be published over the next few days" This will be a good way to earn Akro tokens.
They havn't been doing a lot of promotion/marketing yet, so this might be a good time to get in before the hype starts. The advantage of getting in early is higher potential rewards, but this comes with more risk since the project is not proven yet, nor is the value of the Polkadot ecosystem and integration.
Market Cap - ?
This is arguably the hottest new chain addressing Interopability, and complimentary services to Ethereum such as scalability via interoperable sidechains. They have an ecosystem which is rapidy blossoming, as evidenced by the Sor chain, which we discussed above, and others as well. They will serve as an "umbrella" Operating system for many other sharded parachains. There is no clear winner in this space yet.
The DOT token is used for staking (proof of stake) and governance, and network fees. They are not ERC20 tokens, so you need a native wallet to hold them. A standard Eth wallet won't do. The tokenomics are as follows:
"It is intended that the Polkadot genesis block will contain 10 million DOTs. The overall supply of DOTs over time will not be fixed, nor will it be subject to a pre-determined upper limit. DOTs will be subject to an as yet determined inflation model which envisages that the supply of DOTs will increase each year and are likely to be designed to incentivise participants such that a sufficient proportion (yet to be determined, but perhaps 50%) of all DOTs in issue at any point in time will be staked to support the proof of stake consensus mechanism that underpins Polkadot."
Interoperability is becoming a strong meme. Gavin Wood is a respected leader, and gained a reputation and experience with Ethereum, and what it takes to improve. They seem to be more agile than Ethereum at this stage, but its not a zero sum game. They can both grow and become successful.Their major competition at this stage is probably Cosmos, which is also a good project and is also attracting some good projects and developers.
More awesome to projects to come. I will add them to the list as soon as I can do some more research, and due diligence ...
I wasn't intending for this post is to provide an exhaustive list, since there are so many new projects being announced, almost daily. It is becoming like the ICO bubble, but we are hoping it will be better this time around. This article is just to help you narrow down to a short list of promising projects that I think have serious potential, and avoid the ones that are just trying to capitalise on the Defi mania. I am trying to identify the ones with long term potential, and real earnings. You still have to do your own research, and let me know what you think. Some of the coins that I talked about have been announced but not released yet. So technically, they are “low market cap”. You can't buy a couple of them yet - but investors should make plans to reserve funds for these opportunities. Most of them should be available by the time you read this. There is always an opportunity cost that you should be aware of if you spend funds on other projects which may not be as good.
As I mentioned above, many of the small cap coins are new, so there isn't much historical data yet for fundamentals. So, in many cases, we have to rely on other metrics (described above) the project story, or narrative to determine if it will do well in the market. After there is more trading and price data, PE ratio etc, it will be easier to analyse more objectively. I also talked about risks (Dumpamentals), since I think this is important for investors to know about. And as you must know by now, the market isn't necessarily rational, especially in the short term.
As usual, feedback on your thoughts are welcome. I will be updating this post as new opportunities become available, so its a good idea to bookmark this article, and stay tuned. Bye for now.