Despite, the title and subtitles later this isn't going to be your average bedtime story. After a successful AMA with the Statera team, Publish0x launched us into a writing competition to discuss the Statera project from our own point of view. If I am honest I was on the fence about joining in with this one. Having had little-to-know exposure to the project except for following the AMA I was at a loss as to what I could contribute to the topic. However, rather than skipping out on any of the hard work it seemed much better to have a go, throw my hat in the ring and see if I could learn a thing or two on the way. In retrospect I'm glad I did, not only was learning about the project a rewarding process, it is one of those gems that I may well have overlooked had the opportunity not arisen.
The focus of this article will be the Statera project through the lense of an average investor with a little bit of crypto knowledge a keen interest in shaping my own financial future and just a touch of skepticism. Hopefully you find something useful here and decide to do a little more research into the project under your own steam, it is well worth a look.
Chapter 1: Investment (the little fish in the sea)
Being an average crypto investor has its own perks and flaws. Quite often we see from the sidelines exciting stories of people buying into projects and finding they actually bought a ticket to the moon in a golden Lamborghini. New projects often focus on this as a selling point "Get in at the ground level, just like before Bitcoin was big". However, in my experience the cypto-sphere can be a harsh mistress and can at times be akin to a jumping on to merry-go-round that is spinning hundreds of miles an hour. In reality, however, it can be a bit of luck mixed in with a fair amount of hard work. Sure there are those that get rich quickly. For the bulk of us though it can be a slog and rightly so.
One of a key factors that can make the crypto-world so daunting to the average investor is volatility. We all know, especially the world's current state, how global changes can move mountains. In the crypto-world though this appears to happen not just at the macro level but at the micro level and with greater frequency than we can predict. This is off putting as a new investor and I've often seen war stories (usually on the Coinbase Reddit) about how folks bought into something only to have the value of that coin drop very quickly and put the fear of god into them. In my mind this gets in the way of adoption. In any investment there is risks but the exaggerated risk we see with cryptocurrencies can really be a barrier which, without substantial market trading experience or luck (but mostly both), make it hard to know when/where to jump in.
As with most regular investors it comes down to a simple goal:
You want to work toward financial freedom and support you and/or your family in the future.
In order to achieve this kind of goal most of us are willing to put in some hard graft. However, when you're working all week and wanting to build up some future savings you want to know that you're able to mitigate risks. You're happy to save regularly but don't have time or skills necessary to become a chart wizard or or a whale. Well, even for the little fish there is a place in the pond and funnily enough, it is beside one of those lumbering giants.
Chapter 2: Growth Goals (the friendly whale)
Currently DeFi has opened a proverbial pandora's box. The number of products out there these days are staggering and given that growth is really booming it feels like the possibilities are endless. As it currently standards, we can see the mirroring of traditional finance products with DeFi:
- Transaction p2p
- Saving accounts (through liquidity farming)
While these are all great, they are very much short term. Interest rates are can be inconsistent and token values can peak and trough quickly. Indeed, even Vitalik Buterin referred to yield farming as "Unsustainable". The transaction fees are through the roof, which make chopping and changing expensive for the lower level traders and the only other option is to hand over the keys to centralized exchanges, a trust system that the community as a whole is trying its best to break.
In my mind this is where projects like (I don't doubt it will be one of many) Statera steps up.
The gap in the market (or use case) is long-term lower risk savings.
But what is it and why do I think that?
Statera is an ERC-20 token, however, it is not just you're standard token. It is what is termed a deflationary token, that is to say the supply decrease over time (by 1% of the transaction value for every transaction to be precise). Now this in itself still isn't all that ground breaking. There have been tokens before that reduced in supply, the principal being that if something is scarce the value usually goes up. No, instead of just being a deflationary token, STA (represented by the Delta token), along with WBTC, WETH, LINK and SNX forms a part of and index of fund call the Phoneix Fund (or as I like to think of them the super best friends club). The goals of the fund are simple:
- Reduce Volatility
- Promote Value Growth of STA
Now I know I was thinking at this point, that is very altruistic and indeed, quite pie in the sky. However, it is the last piece of the puzzle that clinches the deal is the mechanism "Smart Contact Powered". Well most things in the DeFi ecosystem are smart contract powered so what does it mean here?
There must be Balance:
The balancer's job is to automatically and actively manage the distribution of the tokens in the fund depending on external pricing changes. The goal for the fund is to maintain the tokens in the following ratios:
- 40% Delta tokens
- 30% Wrapped ETH
- 10% Wrapped BTC
- 10% Chainlink
- 10% Synthetix
It does this by acting like an autonomous trading machine (a big ol' whale) that interacts with markets to buy and sell tokens in order to maintain the set distribution. This regular shifting in trading helps the fund recognize profits when tokens pump and identify potential gains when tokens dump. Spreading it out over multiple tokens helps provide additional stability and spread the risk. As we know smart contracts are driven by simple programming logic which when you boil it down is most often a series of IF-THEN-ELSE (if WBTC price drops, then buy more, else if WBTC price pumps sell some...etc.). As this is automated and the crypto-markets never sleep it is much more efficient than trying to perform this process yourself, there is no emotion, just cold hard logic, the contracts shift to the ebbs and flows of market so we don't have to constantly be chart checking.
In addition to this automated balancing process the regular trading opportunity and linking of STA via the Delta token to the fund actually complements the deflationary nature of the STA token. Trading of the STA token directly burns 1%, readjustments of the Delta tokens in the fund also leads to more burning, so naturally as the whale swims along adjusting directions left and right the effects of these adjustment spread outward positively impacting the price pressure on the STA token and the system as a whole.
One final jewel in the crown that I believe is often overlooked is the inclusion of Synthetix in the fund. We all know why ETH/BTC and LINK are so important but SNX (at first glance) was a new one to me. However, the team have identified that crypto cannot happen in a vacuum that is to say, we need to interact with the outside world to garner wider adoption. SNX as a token is doing just this, allowing for trading of real-world assets on the blockchain, effectively taking an existing system and giving it a platform to operate in the crypto space.
Chapter 3: Simple Savings (a symbiotic relationship)
So going back to chapter 1 we talked about the average investor (yours truly) and how it can often be difficult to get involved. With Statera there three pieces to this puzzle, all of which start with liquidity.
For the most part I'm going to focus on the Statera Token pool because it is here that we have the entry level. The goal here is to provide equal parts of ETH/STA into the Uniswap pool. Providing liquidity to a pool like this pays the provider fees, however, this is where the automated trading comes in from earlier. If the smart-contracts are regularly trading this helps us to stack fees, there is always a market for the liquidity pool and always fees to be earned. Additionally, the constant trading affect the deflation rate of the tokens you hold hopefully pushing the price up, passively increasing your savings. It is like its own positive feedback loop, a Perpetual Trading Contract if you like. The general direction of which should be upwards.
Getting onboard something that is steadily moving forward can (as a smaller scale investor) be considerably less daunting than timing your entry into the crypto-sphere on the markets alone. My goals for this project and where it sits in my own portfolio (and it is important that it is only a part of a big picture) are this:
- Stage 1: Regular monthly investments into the Statera Token Pool (somewhere in the region of $15-20)
- Stage 2: Once I've built up a decent potion of the Delta Tokens (and when fees calm down on ETH)
- Combine with some of my other holding into the Phoneix fund
- Add a portion to the Delta Pool
- Maintain a portion in the Statera Token Pool
- Stage 3: Continue to feed into the Statera Token Pool and at regular intervals revisit stage 2.
I see this fund as the beginning of a nest egg one of many to come that will offer exposure, at reduced risk, to allow pension like mid-long term investments to be taken out by anyone. For me this goal will be put toward being mortgage free before I retire, a realistic goal but something that is unlikely to happen over night.
As the maintenance of this product is minimal it makes for a really good regular save and forget fund. In some respects I think of it as similar to a pension fund product and as alluded to earlier I wouldn't be surprised if we start to see similar products to this crop up both within the crypto-sphere and outside of it.
One of the most important selling points, which cannot be overstated, is the fund being managed and run by smart-contracts, not a separate fund manager. This has two main implications, firstly fund management fees are null and secondly the contract has no hidden agenda, it does its job, which by virtue of the programming benefits the holders.
Finally, because this is all about accruing fees and pushing up long term STA price the longer you're in the pot the better. However, for those that cannot jump in at a massive scale like some investors, the reduced volatility means regular saving can be less "timing sensitive" and can built into everyone normal saving routines.
As I said at the beginning, I was in doubt about the project having not really scratched the surface before now. After having done some research I can honestly say I'm extremely impress with the 'selflessness' of the project. It seems to reach out and identify a gap in the 'long-term saving for the future' DeFi space and offer up a trust-less, barrier-less solution that could easily be integrated into everyone's portfolio with minimal effort.
Remember the Risks:
A few times now I've mentioned in this article reduced risks. Therefore, it is important to remember any investment of this kind poses a risk. The first and most powerful risk for this project would be adoption. After that, given the fund is built from cryptocurrencies it would still be subject to macro market conditions (i.e. like those that we've seen during this pandemic). Finally, smart contracts are not infallible and (though this project has been audited by a reputable external party) therefore there is always the potential that any weakness are exploited to the detriment of the whole.
I urge anyone that is interested in a much deeper look into this project to go through the white paper:
Consider where the project may sit in your portfolio and how it would work toward your own personal financial goals.
Thanks for reading, good luck y'all!