DeFi Diehards and Questionable Decisions
The idea of financial independence and security is alluring for many investors in decentralized finance (DeFi). The attractive yield rates of some protocols have drawn in tens of thousands of individuals to the cryptocurrency space, but the prospect of rugpulls, exploits, and dumps make them rife with risk. One needs to look no further than the recent Grim.finance hack to see the results of such debauchery.
Many investors could never stomach the idea of losing their whole life savings, and thus typically stick to a levelheaded approach when investing in large DeFi operations like Hector DAO, Olympus DAO, and Marinade.finance, to name a few. However, for a select number of "whales," as large investors are described, they liked what they saw in these potential returns and were willing to take the risk. While some may question their decisions, the numbers point to them being very savvy and very, very lucky to have entered and held their assets in successful DeFi platforms for so long. And who are we mere mortals to question their diamond-handed prowess? Maybe there is something of educational (or at least entertainment) value to be gained from their stories.
Enter the Tomb.finance protocol. Tomb game theory works on the concept of seigniorage in it's effort to maintain an investor-driven, protocol facilitated price peg between the issued TOMB token and the Fantom protocol's token (FTM). It achieves this this by:
- Issuing TOMB to holders of staked "Tomb Shares" (TSHARE) when the price of 1 TOMB is above 1 FTM (i.e. "over the peg"). This inflationary expansion of the TOMB supply pulls its value back down closer to the 1:1 peg over time.
- Conversely, when 1 TOMB is valued less than 1 FTM (i.e. "under the peg"), all TOMB issuance stops. "Tomb Bonds" (TBONDS) are made available for issuance, where 1 TOMB is exchanged for 1 TBOND and removed from circulation, causing deflationary pressure on TOMB's price until the peg is regained.
Further, TSHARES are issued to holders of staked LP tokens for both FTM-TOMB and FTM-TSHARE liquidity pools on the Tomb Finance platform. This creates a recursive effect for investors where the common practice is to provide liquidity, get TSHARES, stake TSHARES, and receive TOMB during "expansionary epochs" when TOMB is over its peg. The commonly adhered to "50/50" strategy dictates that one will take 50% of TOMB profits, and reinvest 50% to provide stability to the protocol.
Tomb has had its own volatility issues in the past, experiencing an exploit in early September 2021 when it was found that investors could skirt the tax for withdraws from the protocol which were meant to prevent runs and keep the protocol stable.
In the months following the popularization of the exploit, Tomb was resurrected from its grave by Harry Yeh. Mr. Yeh is the founder and managing partner of Quantum Fintech Group and outspoken promoter of the Fantom blockchain platform and development of its ecosystem. Mr. Yeh brought Fantom into the limelight during the 2021 season of Formula 1 with the sponsorship of the AlphaTauri F1 team and an NFT collaboration with driver Pierre Gasly.
The following section contains a series of questions put forth to the Tomb community. While some expressed interest in answering questions, in the end only one was willing to answer to the level of openness on the record for The Public Ledger to publish. I had the exclusive opportunity to speak with this individual via Discord about what has made Tomb.finance so special to them, what motivated them to invest, and how their lives have changed as a result.
A Close Encounter with a Whale:
What were the bullish signals that made you invest in Tomb?
A bit of background first: I first bought FTM back in 2018 and locked it away in a validator. Then I had the opportunity to get involved in Validator 21 and I locked up a fair amount of FTM and it’s now run by a few people as a “community node,” and we all get a share of the rewards each week as regular passive income. Getting into FTM early has enabled me to take some bigger risks along the way. So, moving on to Tomb – I was looking at the project along with others in the FTM ecosystem in the summer of 2021, and I was about to pull the trigger when the exploit happened. It was a shame because I loved what the dev team were doing. It was different from the other stablecoin pegs out there, and if you believed in FTM’s value going up, this could be a winner. I kept an eye on things, and when Harry said he was taking a look at it I snapped up some Tomb as a risky bet.
What made you go "all-in" (if you weren't before) on Tomb? Are you all-in, or have you been at one point?
I was online one evening when I noticed the Tomb/FTM price suddenly rising. I think it went 4x or 5x from my initial entry, so I knew something was going on. I also noticed TSHARE was lagging behind, so I flipped my whole stack of Tomb to TSHARE (which was then around $500) …the rest is history.
What is the most value (in USD) you’ve had invested in Tomb at a given time?
My initial Tomb investment was around $6,000. I think before the recent downturn that was well over $2 million.
Has the thought crossed your mind of getting the rug pulled from underneath you?
Hell yes, having over $2 million from an initial $6,000, I felt very over-exposed. With TSHARE being so volatile, one day I would look at Debank and be $500k down, but a few days later I would be back above. I didn’t so much consider a rug situation for Tomb given the team around it, but hacks and other risks are on my mind.
What are your thoughts on Harry Yeh and his takeover of Tomb?
He basically saved it, it might have recovered [on its own], but just look at the level he has taken it to. With the future plans, it’s exciting times.
Are there any improvements to the management of the protocol you would make?
Even more transparency. I know Harry does this better than most and we get “Tomb Tuesdays,” but there can always be improvement. For example, beyond Harry who else is involved in Tomb? How big is his team?
How often do you check tomb.finance?
Way too often, my daily routine is – check total market cap, check BTC, check FTM, check Tomb and the peg…did we print? There is nothing better than living your daily life around epochs when we are printing.
How often do you collect profits, and how do you transfer them to fiat in order to access them in the "real world?"
I use the Cemetery and Masonry, and I have TBONDS. I move my Cemetery rewards to the Masonry every 3 epochs. When we are printing, I withdraw every 3 epochs and I normally put 70% back into my LP and 30% goes into USDC (that varies depending on price, if it’s down I convert less to USDC). Once a month I look across all my passive income sources, consider how the crypto market is doing, and I decide how much to cash out. If it has been green and we are on a high, I cash out more. If it’s red I might not cash out anything. Being in the UK, my route out is a bit complex: I move to Binance, then to Coinbase, and then to my bank account. Binance proves to be difficult to cash out directly [to fiat] sometimes.
How has this investment changed your life?
FTM is the first thing to change my life. The passive income alone from that equaled my monthly salary (I’m in the software game), and I thought that was good. But Tomb has blown that out the water and I’ve earned my monthly salary in 2 epochs….that’s fricking insane!!! You then really question why you should work, so I resigned in November and my last day is in February . I’m going on some adventures: I’m heading to the South of France for 2 months, climbing Kilimanjaro, visiting the Everest base camp, and some other random stuff.
What is your favorite "splurge" purchase with your gains?
I just bought a sauna for the garden, and I also just test drove a Porsche 911 GTS, so that’s the next big purchase.
What are your recommendations for those with less capital looking to invest in the protocol?
Take a punt with what you can afford, pick the right moment to get in (when the market is red), play the full Tomb money circle (Cemetery and Masonry) and try not to over complicate things with some of the other protocols. Then have patience and let the power of compounding work for you over a long period of time. One thing I know is that I’m an awful day trader so locking for a long period of time has worked well for me personally.
What are your thoughts on the upcoming LIF3 airdrops and the future of the protocol?
Can’t wait for Lif3, I need to know more about it but I will be entering for sure. I’m excited because it’s also going to drive the need for Tomb as a use case.
What did you wish you knew when you started in Tomb? In crypto in general?
For Tomb, I took the time to read the [expletive] docs first. It’s quite complex, so everyone should know what they are getting in to. Second is to just play the long game and back the right people, teams, and community. Third is to turn off when the market is bad, don’t let it consume you. The price is irrelevant unless you are selling. Forth and most important that so many people fail to do – take profit along the way! If it’s green and you feel euphoric SELL.
Any other thoughts or reflections to give? Maybe something I didn’t ask that you want to provide an answer on?
I should have added somewhere that before I made the decision to give up work to live off my passive income, I made sure I cleared all my debt – credit card, car loan, and mortgage were all paid off before I made that step to financial freedom and living off passive income. That was really important to me because you never know what can happen in crypto. My plan is to sell off some as FTM moves to $5 then $10 ranges and move funds out into some other areas such as property. Other than crypto, I have a pension but no other [conventional] investments. My plan is to head to Portugal later in the summer and look to buy a property and apply for the Golden Visa. That gives really decent tax breaks for crypto. After that, I might be buying a third property and getting returns from those. Nothing beats crypto for mad returns, so I will always have some skin in the game while trying to balance it out more.
The Public Ledger is grateful to our interviewee for their time and candor in revealing how they have been affected by their financial decisions. This individual represents a trailblazing class of the boldest and bravest among cryptocurrency investors. While tall tales such as these are entertaining and impressive, it is important to note that for every one great success, there are many lost souls who have seen their money vanish to exploits and rugpulls. It is critical to always fully research, understand a protocol’s concept of operation, and assess the risks of DeFi in your own personal financial journey.
Author's Note: This story was written due to its intrinsic interest and entertainment value to cryptocurrency investors. None of this story's content should be construed as investment or financial advice.