DeFi vs TradFi Bonds: Why Olympus DAO (OHM) and Wonderland (TIME) are so fascinating

DeFi vs TradFi Bonds: Why Olympus DAO (OHM) and Wonderland (TIME) are so fascinating

Bienvenidos mis ositos, tu siempre eres mis queridos! (Welcome back little bears you are always my dears!)

It’s easy to be jaded after you’ve been in the crypto space for a bit. The shills, the FOMO, the FUD and the incessant chatter from random trolls on the interwebs. Every once in a while though you stumble across a project so bizarre and novel you can’t help but be drawn in.

The aptly named Wonderland did not immediately hook me. It took me some time to understand and then to appreciate what Wonderland is attempting to do. Let’s fall down the rabbit hole together like Alice. Don’t worry if you have a low IQ. Pandas aren’t that bright either.

Now Wonderland itself was a fork of Olympus DAO. At the time I didn’t understand Olympus and I just forgot about it. It was also on Ethereum so I couldn’t afford to take advantage even if I wanted to.  Now we have a second chance with Wonderland.

Wonderland currently resides on the Avalanche network so it’s cheaper and faster to interact with. It may also come to other networks so keep an eye out for it. At first most may dismiss Wonderland as just another joke/meme/scam type of coin.

However if you take a look at the docs and interact with the project you will appreciate it more.

But I will attempt to illuminate bonds and the current fixed income markets first. This way you can understand why I’m so excited about Olympus DAO and Wonderland.

Most investors only have exposure to fixed income through a fund either in exchange traded funds or mutual funds. For most investors especially the younger set, bonds are boring. The general investing public would much rather gamble on meme stocks.

Bonds generally pay interest semi-annually in other words you get interest payments every six months. ZZZZZZ

Bonds also get quoted in weird amounts. When they are first issued by a company they trade in “packs” of $1,000. Some finance folks will call this par value. Once they start trading on the secondary public markets they can trade at a discount or premium to par value.

The bond version of a ticker symbol are funky. You either have to know the CUSIP or ISIN depending on your broker.

Let’s take a look at an old trade from the Schwab Bond page:

Schwab Bond

First the bond version of a ticker here is the CUSIP 34984VAB6. That’s not like stocks or crypto where the symbols is usually 3 or 4 letters.

Then there are minimums. Generally speaking I don’t think I’ve ever bought just one bond. Usually I need to buy between 5 to 10 bonds.

In this case I was able to get away with buying only 4 bonds (Face value $4,000)

However I didn’t pay full price. I bought this during the pandemic panic sell of March 2020. I only paid $732.50 per bond or ($732.50 x 4 bonds = $2,930). The mark up is like a commission I had to pay ($10 in this case).

I also had to pay the accrued interest to the previous owners.

For some reason some brokers like quoting bonds at a tenth of the real value in this case $73.25.

So why buy bonds if they are such a pain in the butt? Most brokers have lousy user interfaces for the average investor.

I have some theories as to why that might be.

Bonds are a much larger market than stocks. Large financial institutions can move large amounts easily while certain funds, traders and other middle men can make money by arbitraging the large inefficiencies.

Then there is a lot of gatekeeper type of jargon to discourage the little investor in favor of big institutions. This creates a demand problem from the little guy. Who the heck wants to buy individual bonds.

On the other side the huge financial institutions make tons of money from the bond market every year. Why would they want more competition especially from the general public? So there is the supply issue.

There is a lot of alpha left on the table for bonds.

But that’s the TradFi world. What about for DeFi?

Let’s keep two concepts in mind from the TradFi world.

There is an interest rate set by the borrower called the coupon rate. Then there is the market interest rate set by the marketplace. This will determine the price of the bond. If the coupon rate is less than the market interest rate rational traders will sell off enough bonds to cause the bond price to yield the same as the market. And vice versa.

The DeFi bond market remains rather limited and there hasn’t been too many enticing bond projects. Wonderland changes things by being a wacky almost gamified version of bond trading. It boils the bond trading process down to two decisions.

Do you want to mint or do you want to stake?

Minting TIME at a discount can be done by using various forms of capital including LP (liquidity provider) tokens! In return you get a “bond” in the form of the TIME token.

TIME Minting

OR you could just buy TIME on the open market through Trader Joe (Avalanche market maker) and then stake the TIME token directly.

TIME Staking

When you stake you get an absurd APY (likely to go down in the future).

The platform makes it easy to compare the ROI (return on investment) from staking versus the ROI from minting “bonds” through different types of collateral.

For example in the screenshots above the ROI for minting MIM “bonds” is 9.28% vs the staking ROI of 9.1340%

In this example it is better to mint the TIME token by using MIM. Please note that you need to wait 5 days to be fully vested if you decide to mint.

Of course you should keep an eye on these rates before you proceed because the market is always moving.

Once you stake your TIME you will also get MEMO in a 1:1 ratio.

MEMO is the liquid collateral token that allows you take out loans against it in the stablecoin MIM

Before you take out a loan you need to wrap it as a wMEMO token.

What I would like to see from Wonderland is more transparency somewhere on the website. We know that the Wonderland treasury is backed by different CDPs (collateralized debt positions) but it would be nice to see a schedule of what exactly is in there.

Right now the TIME price is comprised of a risk free value floor plus a market based premium. I’m in the middle of building a modest position every time it dips.

What I would like to see in the future for Wonderland is more use cases for either the TIME or wMEMO tokens.

For example, over in Olympus DAO they offer a potentially good financing option for newer protocols called Olympus Pro. This feature allows newer projects to own their own protocol liquidity.

Of course there are risks with Wonderland and Olympus DAO. There is the usual smart contract risk. Then there is a systemic crypto market risk. Markets don’t go up forever. I’m sure quite a few of my dear readers remember the brutality of the 2018-2020 bear market. Depending on what you bought you probably went through a 80-99% drawdown.

Some projects never recovered or were even delisted. One of the reasons that I like Wonderland is that Daniele is one of the key talent involved. I will let you peruse his tweets and make up your own mind as to whether you decide to invest or not.


#OccupyDeFi 🤌 #PeopleMaxi - Together we are One - Frog Nation



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Be sharp, stay hungry let’s get that money!

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