In the world of DeFi, Total Value Locked (TVL) can make or break a protocol. If you read my last article on $VELO, you’ll remember that I brought up TVL several times, for the money flowing into $VELO (and their ability to keep it there) is what’s making it an absolute powerhouse on Optimism. When starting out, many new protocols either have to spend a ton of money on marketing and/or to print their native tokens like crazy in order to attract liquidity coming in. The only problem is that this normally only works temporarily and can greatly dilute the token, just as we’ve seen with the solidly fork, SolidLizard:
Once the token price (in this case $SLIZ) is exhausted, big players and other farmers will mostly likely go looking for the next pot that’s sweeter. And I’m not saying that platforms that adopt this type of incentivizing can’t be profitable in the long term, but in order for the team to survive the team has to pivot to encourage liquidity to stay.
Enter The Maestro
BeethovenX, who by far as the most creative names for their LPs in all of DeFi, are one of those projects that got caught in the huge liquidity drain on Fantom last May:
With the max exodus of capital from cryptomarkets following the Terra Death Spiral, projects on Fantom perhaps had it the worst, forcing many teams/protocols to have to pivot to other chains or ultimately shutdown.
If you look closely in the graphic above, you’ll notice that this is exactly around the same time that the Beethoven made the pivot to go on Optimism — one of Ethereum’s most popular layer 2’s. With only around a tenth of the volume that they had prior to the Terra Death Spiral, what’s been most impressive is that Beethoven is continuing to build out new strategies which has allowed them to stay alive and resilient throughout this bear market.
Let’s take a look at some of their highlights…
Going Optimistic
As I mentioned before, Beethoven’s pivot to going on Optimism’s L2 is a testament to the amount of building that the Beethoven has put in. Increasing in TVL by more than 50% (and continuing to grow) over the last month, it’s the only platform that was Fantom-native breaching the top 10:
For reference the next Fantom-native protocol is Tarot.to, which has about a sixth of the TVL that Beethoven does, and is currently ranked twenty-third.
LPs with little impermanent loss
If you’ve kept up with some of my articles on maximizing stablecoin returns, you’ll know that Beethoven has some really solid LPs that have provided very consistent 10%+ APY returns:
Beethoven’s initial claim to fame was being one of the premier protocols to use BalancerV2 technology, which allows the creation of weighted (more flexible and customizable) LPs with varying proportions of component tokens.
As you can see in the graphic above, a lot of these pools are also pretty decently sized in volume, but they are not auto-compounded. However, if you’ll notice on reaper.farm that the ByteMasons have created some auto-compounding strategies on top of these LPs:
Speaking of the ByteMasons, this leads me to my next highlight…
Reliquary & $maBEETS
As I mentioned before, one of the key measure to a platforms’ success is liquidity, and now next week (March 1st 12:00pm UTC) the Beethoven will be rolling out with Reliquary, a ByteMasons-designed smart contract which will potentially kick-start a drive to maintain/deepen liquidity by incentivizing more people to hold $BEETs for longer periods of time via maturity bonds ($maBEETS), represented through composable NFTs called “Relics.”
Similar to Liquity’s Chicken Bonds (except for the fact that it’s a staked LP rather then single-sided $LUSD), $BEETS holders are incentivized to stake and hold, regardless of their position size. The longer someone holds, the longer their position matures, thus earning a greater share of mining rewards until a maximum level of maturity is obtained. However with Chicken Bonds, you can do one of two things — either “Chicken-In” or “Chicken-Out.” With Chicken Bonds your principal might be protected, but unlike $maBEETS if you decide to Chicken-Out and exit your position, your accrued gains will be forfeited. Additionally what’s pretty novel about Relics are that there’s an added degree of composability where holders will be able to do one of several things including:
- Adding to your LP/NFT/Relic position
- Splitting and/or merging multiple Relic balances with one another
- Shifting balances from one relic to another
Of course because each relic has its own timestamped maturity date, doing any of of these actions can impact that maturity date in a positive or negative manner. If you’re curious about the exact effect that one of these actions could have, I highly recommend that you check out Franzns’ math as he breaks down each scenario.
Personally I think that this is a really bullish move by Beethoven, as I imagine that it will most likely encourage more liquidity to stay on the Beethoven protocol while at the same time significantly cutting down $BEETS sell pressure. If LPs are attached to maturity dates instead, it would make more sense to try to sell these open NFTs on the open market to see if you can get a profit on your positions future maturity potential rather than immediately unloading your funds.
What do the maturity rates/dates actually look like? 0xsouvlaki does a great break down, but essentially the overall rates incentivize people to open new positions as up as well as incentivizes people to hold in the long-term over a 11–12 week period:
If you notice in the graphic above that maturity rates quicken the fastest in the first couple of weeks (thus incentivizing people to open positions) and also around the 9th week (which encourages people to hold them for the longer term). I would imagine that this would create several gamified incentives for people wanting to maximize their earnings, such as continually adding to their positions in both of these ranges to continually gain maturity at a faster rate.
Other factors to consider
In crypto, everything can dump, everywhere, all at once — Even though people might be able to multiply their holdings in $BEETS through these maturity bonds, it’s a moot point if the price of $BEETS completely dumps. The market can be quite skittish no matter how sound the $maBEETS strategy might be, meaning that your overall net value might decrease regardless if the number of $BEETS goes up.
Smallish Marketcap— there was a lot of hype surrounding Liquity’s Chicken Bonds when they first opened up, but even ranked 280th in marketcap, they’ve shown how volatile things can be when whales like OxSifu either buy-up or unload huge holdings of tokens. $BEETS by comparison is approximately 4080th’s in marketcap so in that same vein, it too, is not immune to market manipulations.
The team isn’t doxxed — there are many stalwarts out there who believe that in DeFi this doesn’t really matter, but I figured that this was still something worth noting. That being said, they’ve been personally audited by Trail of Bits last February, but moreover their code (seeing as how they’re a fork of Balancer) has technically been audited several times over the past couple of years.
Conclusion:
I’ve spoken several times in the past about my aversions towards token lock-ups, and with Reliquary, Beethoven may have found the the perfect alternative to encourage blokes like me to keep their liquidity on the platform in order to gain some solid rewards whilst helping the protocol maintain liquidity. Going forward I’ll be excited to see the impact of what $maBEETS has on their already self-sustaining platform, and full disclosure, I’ve already aped in a little bit myself into Beethoven’s Fidelio Duetto BPT in anticipation for the launch that’s scheduled in just a few days.
Thanks for taking the time to read this and be sure to follow me on twitter (https://twitter.com/CryptosWith) to get all my latest updates. Also, looking for a gift for your Crypto-loving/hating friend? Give them a REKT journal to cheer them up!
Disclaimer: And as a final reminder, this is not financial advice and this is for educational and entertainment purposes only. Please as always, do your own research and find what investments are best for you. Have fun everyone!
