The Marketplace of the Future
This short piece summarizes Terra's Minerva, a marketplace that adds value to appreciating, real-world fine wines before they have even been bottled. This is possible by storing fine wine on the blockchain as Andromeda NFTs (ADOs) while compounding UST deposits on TeFi protocols.
IMO, this is an excellent example of how crypto and blockchain is a game-changing no-brainer, as it can add value to any real-life appreciating asset. Of course, it’s built on Terra by the community.
Terra is a smart-contract ecosystem built around the largest algorithmic stablecoin out there: Terra's UST. Since the Colombus-5 upgrade in September, hundreds of powerful dApps are being deployed on this powerful ecosystem, most of which build on top of Anchor Protocol's ~20% stable APY and Mirror's synthetic-assets like mAMZN and mGOOGL.
NFTs or Non-Fungible Tokens with unique attributes have been hot in the media since the ‘Disaster Girl’ meme sold for half a million USD last year. Artworks, memes, pixelated images, and all sorts of so-called ‘collections’ have since exploded into the scene, creating a highly speculative multi-billion dollar industry out of thin air. The media exploits these celebrity-driven NFT sales, often leaving out the real-world functionality of this technology which Minerva seeks to exploit.
Supercharged NFTs: Andromeda Digital Objects (ADOs)
ADOs (Andromeda Digital Objects) are NFTs with upgraded functionality, which allow platforms like Minerva to store more than just a unique image attached to a unique owner. For example, ADOs can call on off-chain data like updated Livex Fine Wine 100 Index or weather conditions in Bordeaux to trigger a Smart Contract that adjusts the price of an underlying asset, like the price of the ADO itself. ADOs are built on Cosmos using the CW-721 token standard and so can be used on Terra, our favourite ecosystem.
The Fine Wine Industry
Wine making is a millennial practice that is now intrinsically intertwined with popular culture and the national identity of entire countries like France, Spain, and Italy. Family-run vineyards have been going on for centuries, and according to VinoVest, “The fine wine market has outperformed most global equities and exchange-traded funds (ETFs) and is less volatile than real estate or gold. More importantly, it has delivered 13.6% annualized returns over the past 15 years.”
However, the long-life cycle of wine from vineyard to bottle introduces many risks, some of which may be catastrophic. Harvest failure or a distracted forklift driver can ruin an entire batch of wine, taking its sell value to zero in an instant. Essentially, wine makers take on risk throughout the whole process without receiving any rewards. On top of this, bottling the wine does not guarantee sales, as many good wines don’t sell because of bad marketing.
In comes Minerva, roman goddess of commerce
Minerva's marketplace lets verified Wine Merchants mint an ADO for a set amount of wine for sale at a certain point in production. For instance, fictional 'Chateau Pinot' from Bordeaux mints an ADO representing a volume equivalent of six bottles of wine currently ageing in the chateau’s cellars. This ADO can be snatched by any investor on Minerva, who can buy it using UST and agree with 'Chateau Pinot' on a maximum ageing time frame, say, 20 years. This essentially makes each ADO a Wine Future which an investor may buy with Terra’s native UST stablecoin.
Why force the industry to change?
So why the hell would sophisticated no-coiners with decades of experience running a vineyard or flying round the world finding the best wines start dabbling in a world known for its glorified jpegs? Well, as they say: ‘Money talks’, and >20% yields on idle wine for both the merchant and investor is completely unheard of in the industry (and most others for that matter!). In fact, the Minerva team recently revealed in a podcast that they avoid giving any yield figures to potential merchants as the promise of crypto yields arouse Ponzi-scheme suspicion.
Ageing APRs into APYs
When a user uses UST (Terra stablecoin pegged to the US dollar) to buy the merchant-issued ADO, this money is actually locked in Minerva Investment Vaults, generating passive income from the get-go. The Vaults’ Smart Contracts call on battle-tested TeFi protocols like Anchor and Nexus, and new ones like Apollo and Sandclock to create a yield of at least 20% APY on an otherwise idle investment.
Like good wines, compounded crypto-grade yields also improve with age, leaving investors with an appreciating wine, making appreciating yields on top.
For the Merchant: Lossless Liquidity
The way I see it, Minerva rewards the wine maker for taking on risk during the wine-making process, by allowing it to redeem a proportion of the crypto-earnt yields every 6 months at no additional cost or risk to their business. There are no restrictions on the use of this income, so it may be used to buy new equipment, increase wages, buy insurance or whatever the merchant sees fit. And if they go full-on Defi 2.0, perhaps they could even buy-back some of their own wine and do a (3,3) [Full-on speculation on my part :P]?
For the Investor: Yield on yield
The fine wine investor guarantees an early purchase of the product while knowing a crypto-scale yield is being made on his already appreciating wine, which is redeemable upon receipt of the wine. This is a win-win situation without mentioning the free NFT digital art piece representing this unique batch included as part of purchasing the ADO. So, while the ADO acts as Proof-of-Sale and is burnt upon delivery of the wine, the separate NFT is kept by the investor as memorabilia (and who knows, since each is unique and aesthetically-pleasing, perhaps it might even have value a secondary market like Terra's 'Knowehere' platform).
On top of this, as yield-bearing, on-chain assets backed by real-life fine wine, Minerva ADOs are of top DeFi utility. For example, a future borrowing platform on Terra may allow the user to put it down as collateral for a crypto loan, or perhaps even re-sell to another investor in a secondary market.
Insurance and Charity
But the show doesn’t stop here, Minerva goes the extra mile and uses the remaining of this crypto-yield for bootstrapping additional off-chain insurance in case something goes wrong, regardless of the Merchant’s or user’s existing policy. After two years, this yield is re-directed to a transparent, permissionless, blockchain-based Terra charity with the aim of sharing some of the wealth to those who need it most.
Being a DAO (Decentralized Autonomous Organization) right from the bat, Minerva is building a platform which is not ruled in secret by a small number of dodgy individuals, but by a community of on-chain stakeholders, through the ownership of $TORCH, Minerva’s governance and utility token.
DAO governance implies that all funds, transactions, and decisions may be openly queried at anytime from anywhere, providing the necessary transparency for users to do their due diligence on the platform’s operations and decisions.
ADOs for Off-chain QC
Minerva is designed thinking of a decentralized web 3.0 future, and so believes that wine storage should remain in the custody of the wine makers themselves. But how does one guarantee the correct behaviour of these off-chain actors who are flawed humans like the rest of us?
The answer is the use of ADOs (remember, NFTs with added functionality) which allow the storage of off-chain evidence such as proof-of-assets, storage facility footage, third party due diligence reports, real-life visit reports by DAO members, proof-of-delivery, etc. This makes the ADO not only a representation of the wine but also a solid 'proof-of-existence', containing as much off-chain information as possible.
Also, Minerva 'escrows' the UST from sales and yields in its vaults, providing the necessary leverage against other off-chain risks such as fraudulent actors, insurance disputes, business default, etc. Being an on-chain DAO, the way in which Minerva handles any of these indices will be clearly laid out and transparent.
So how is the funding team, investors and active DAO members rewarded for providing this amazing platform? Well, in crypto this happens through the ownership of the protocol’s token, which in this case is $TORCH, of which 10 million will ever exist. This token will accrue value as the platform buy backs $TORCH tokens with the revenue brought in from trading, minting and burning fees of the wine-backed ADOs.
Recent Token launches on Terra have suffered from price dumps as a result of mercenary liquidity. Fortunately, Minerva DAO has had the opportunity to observe these problems and big brains who have come up with a novel algorithmic design that takes the best from success stories like OlympusDAO, KlimaDAO and Abracadabra.
Detailed Tokenomics are outside the scope of this article, so please refer to the whitepaper draft on their discord for more information. However, the following points can be highlighted as summary:
- Real-value Backing: A 10% share of the revenue stream will be stored as UST in the treasury to back the value of $TORCH. Using the Livex Fine Wine Index 100 as floor price means the value of $TORCH is backed by the industry's performance.
- Usage-based Inflation: $TORCH vesting/inflation is triggered by the minting of new ADOs on the platform, making it representative of the platform size.
- (3,3): Designed so that it is more profitable for $TORCH stakers (and LP stakers) to lock their liquidity than sell.
- Staking Management: Minerva will dynamically adjust staked assets between Single-token and LP to maximize rewards while providing the optimum amount of liquidity.
- Minimal pre-sale: Minimal amounts of $TORCH are allocated to the team, investors and early-community involvment.
The founding team's expertise and exposure to fine wine is why Minerva DAO is so far all about wine. However, $TORCH was chosen as the token not because it represents wine, but because it is designed for any real-world appreciating asset. Whisky, watches or vintage cars, whatever comes next in the marketplace will depend less on the leanings of the founding team but more on community-involvement.
Non of this content is or should be considered financial or investment advise. I am no financial advisor, I am merely a content writer using freely available data and information to produce the best OC I can come up with for informative and entertainment purposes.
Content references below and in-text.