It seems that Elephant Money has supposedly revamped since my last article explaining the scheme., and you know what that means. Another article, explaining why Elephant Money is still just as unsustainable as before, and is guaranteed to crash and burn in the end.
Elephant Money is, plain and simple, a Ponzi scheme, and they’re obfuscating the fact that the source of yield is you.
If you’re interested in the past critiques I’ve had with the project, and a bit of info about past events, you can read my last article on the subject. My first article was much shorter. This one is a deep dive.
NOTE: I’ve been told that Stampede & Farms have been retired from the protocol. This was not made clear on the fronted, or in the shoddy documentation. This shouldn’t affect the primary point of this article, as all remaining components of the protocol are still demonstrably incapable of being sustainable, but it’s worth noting.
First, to clear up any confusion, I’ll demonstrate how I differentiate between a legitimate project, and what I define as being a scam.
Legitimate, sustainable projects always meet the following requirements
- External Revenue Source(s)
- Assets > Liabilities
So, let’s break this down. By External Revenue Sources, I mean the protocol has a revenue source outside of its own yield earners. For Assets > Liabilities, it’s pretty simple. The protocol must not owe more money than it has to give, AKA; it’s not bankrupt.
For a good example, we can look to Uniswap, the premiere DEX in the crypto space for EVM-based blockchains like Ethereum.
Uniswap effectively has 2 parties involved; the Investors, and the Users.
The Investors are providing liquidity. They pair the 2 tokens together in Liquidity Pools to allow people like you to swap your tokens back and forth, and in return, are rewarded with fees from users swapping their tokens in those pools.
The Users are the ones swapping one token to another, using the capital provided by the Investors, and pay a fee for doing so.
So, where do the Investors get their money from? Simple; the swap fees paid by users. As we can see, the system is incredibly transparent, and the source of revenue is external, which is to say, fees are earned by providing a service with investor capital to users, and the Investors are not the ones paying themselves, which would be a zero-sum system.
The protocol also doesn’t owe more money than it has to give. It had $100 deposited by the Investors, and $15 earned in swap fees from Users. It’s obligated to pay out $115 if the Investors choose to withdraw their entire position, including the accrued fees. The protocol has $115, so it can afford to pay. Thus, Assets > Liabilities, or at least, Assets = Liabilities.
Now, let’s use this same analysis with a Ponzi scheme, and see how it stacks up.
Interesting. The scheme has only $100 deposited, so it can’t physically pay out $115 in earnings, even though it promised 15% APY to the user.
The scheme has more liabilities than it has assets, and also has no external revenue source. Its only source of revenue is the original investor. No matter how many people invest, the system is always promising more money than it has, but it can only take money from the current investors to pay those rewards.
So, now that we’ve gotten our definitions in order, let’s dive into how Elephant Money currently functions under the hood, and I’ll break down how the protocol earns (or rather, doesn’t earn) its revenue.
Here’s the primary aspects of the protocol I’ll cover:
- Unlimited NFTs
- Futures
- Stampede
- Farms
- Trumpet
- Graveyard
- The Herd
Unlimited
Unlimited promises to pay out rewards indefinitely for just a one-time deposit of capital. Now, this notion in itself isn’t entirely ridiculous. Traditional financial instruments can follow similar structures, such as stocks promising yield from dividends for as long as you hold the stock.
So, let’s break down the structure. First, the user deposits BNB to mint the NFT. Then, that BNB is used to buy ELEPHANT, which is sent to the Elephant Treasury. The treasury then pays out 1% of its total balance to NFT stakers in perpetuity.
Here’s a diagram to make it easier to visualize:
But herein lies the problem. There’s no external revenue source. Or at least, it would seem that way. There is one possible source of external yield here: the Elephant Treasury.
The treasury is currently paying out about 20% APR on these staked positions, so after 5 years, it will have run out of the initial investor capital if it maintains that pace, and will need to begin drawing from some other source. The treasury needs some other source of capital that can earn at least ~20% yield without being obligated to pay that amount back, for this system to be legitimate.
So here’s the goal: Find any aspect of the protocol that would prove the treasury has an external yield source, and simultaneously prove that the yield provides for at least the required liabilities of the protocol.
If the treasury has an external yield source that can fund these activities, then it’s legitimate. If it can’t provide any meaningful external yield to pay investors, then it’s lying about its capabilities, and is deceiving investors about its ability to pay out the rewards promised on their investments.
Let’s look at the next part of the project, shall we?
Futures
Futures promises to pay 0.5% daily, “on cash” as long as you deposit at least 200 BUSD (1 BUSD = $1, backed by Paxos & Binance), so $200 minimum. After you deposit, the protocol will:
- Sell 90% of your BUSD for ELEPHANT
- Send the ELEPHANT to the treasury
- Save 10% of your BUSD for immediate interest payouts whenever necessary
- Pay you 0.5% a day based on your initial deposit
Now, this should be straightforward enough:
But wait, there’s a catch. Here’s the obfuscation I was talking about in the beginning. If you want to withdraw your interest, you can’t just withdraw, you have to compound and add new capital first. Let me explain:
When you withdraw, let’s say you deposited $1,000, and have earned $100, you’re not paid a profit. In fact, it gives you $100, then just deducts $100 from your balance, leaving you with $900 left earning interest. You haven’t made any money yet.
See, you have to compound your money, which requires an additional $200 deposit every time, to increase your max balance. So, let’s say that you have $100,000 invested. You’re owed 0.5% of that per day, or $500. If you withdraw $500, your balance is now $99,500.
But, if you deposit $200, and compound that $500 in, then you get a max balance of $100,700. The game theory seems to be that you could compound, say, after earning $500, or after 10 days, which would cost you $200, but bring your max balance up to $100,700. ($100,000 + $200 deposit + $500 compounded yield)
It’s effectively a roundabout way of increasing your cash-out amount while requiring additional investment to take out your interest.
Users are looking for a profit, so they’ll only try to withdraw once they’ve hit a certain threshold. In this case, if a user is owed $500 in interest, they can pay $200 to compound it in to their balance, and then withdraw $500 next time that interest accrues without reducing their max balance.
In the end though, the problem remains the same. The user above was owed $500, but only had to pay $200 to claim it, for a profit of $300, or a loss of $300 in the eyes of the Elephant Treasury, who only received $200 for that $500, and still owes the user their entire deposit back over time.
As you can see in the diagram above, the protocol has actually lost money, because it now owes the user $100,200 (as a liability), but just paid out $500 in exchange for only $200 in new capital.
So, just as suspected, no external revenue source. Investors do have to deposit more money to claim their earnings, but they’re always owed more than they deposited.
Note: The page for Futures on the Elephant Money website has changed to now state that deposits and yield are in BNB, not BUSD. The archived page of the site from just a few days ago (12/22/2023) shows BUSD mentioned as the deposit token. The wiki still states that it is paid on, and with, BUSD. The logo for Futures is still the BUSD token logo. The contract address for Futures seems to have changed, so I believe it has actually had its deposit token replaced with BNB, although I am unsure as to the reason why.
Stampede
The stampede is similar to the Futures situation in terms of compounding, so I won’t re-explain the same mechanism here. You deposit 200 TRUNK to compound instead of depositing 200 BUSD, but all else remains equal in terms of withdrawal calculations. That is, save for one key detail…
Since TRUNK is a token the protocol can actually mint, it simply chooses to, instead of drawing from the treasury with other user deposits, mint new TRUNK if investors want to withdraw over 1% of the total current treasury value.
But of course, there’s no new capital backing these emissions, so the TRUNK token has to depreciate in value from inflation to account for these supply changes. And not only that, we can see that, just as is the case with every other example so far, there’s no source of external capital.
Investors are being promised a return on their investment, but it’s quite literally physically impossible for it to pay out all of its investors profitably, as there’s zero way for it to generate more real yield than is actually deposited. Next!
Farms
The farms seem to play off of the traditional liquidity pool (LP) style paired-token model, where 2 assets are paired together, and earn yield in return. The paired assets don’t do anything themselves, like provide liquidity, or get lent out on a lending market. They just sit in the contract.
The pairs all consist of TRUNK, and various “blue-chip” assets, like ETH, BTC, USDC, etc.
The game theory seems to be that because yield is paid on 2x the TRUNK portion of your position, but pairs must be of equal value in assets when deposited (i.e. $100 in TRUNK & $100 in BTC, even if BTC changes in value later on), then people will be incentivized to buy TRUNK and lock it up when it’s worth less than $1, say at $0.50.
let’s say their total buy in cost is $200, with $100 in TRUNK and $100 in BTC, and TRUNK currently priced at $0.50. If TRUNK goes up in value to $1, then you’re earning interest on $200 in TRUNK, with only $100 in BTC paired with it.
If you had to make a new position at that point, it would cost you $200 in BTC rather than $100 in BTC to start that position.
This seems to be an attempt to re-peg TRUNK to a dollar after its major crash a little while ago that it never recovered from, but I doubt it will work. At some point, people will want to withdraw their earnings, and since there’s been no permanent/protocol-owned backing added to TRUNK, it’s a pure loss that only means a steeper loss of peg in the future.
So, where is the yield coming from? Well, the documentation only explained it further down in a separate section from the Farms page, one that wasn’t even fully up to date, so I had to do some digging to confirm.
It appears the Treasury (in this case, a separate contract nick-named on the contract list page on the official site as “TRUNKTreasury”) is paying the rewards. But where is the TRUNKTreasury contract getting its money? Well, the documentation for the protocol lists 2 sources: Bonded TRUNK, and Redemption Queue Deposits
Bonded TRUNK is from deposits into the Stampede, and Redemption Queue Deposits are something that quite literally doesn’t exist anymore. It’s no longer operational.
So, that means one source: TRUNK deposited into the Stampede. Oh, and newly minted inflationary rewards that dilute all existing holders when it can’t pay out with actual deposits anymore.
So, essentially, this mechanism designed to strengthen the peg of TRUNK is draining the one sole pool that provides rewards for Stampede holders, and is owing rewards on entirely non-productive assets. Thus, it’s simply a drain on the protocol. The longer it exists, the more TRUNK it will need to mint, since it always owes more in liabilities to investors than was deposited in the first place.
The mechanism to restore the peg is actively leading to inflation of the token, reducing the strength of its peg.
Time to move on to TRUMPET.
Trumpet
Trumpet is the most blatant Ponzi scheme style aspect of the protocol I’ve seen yet. It is one of the simplest though, which makes it easier to demonstrate how unsustainable it is.
The way TRUMPET works is users deposit their TRUNK, and receive TRUMPET in return. When you deposit, the protocol takes 5%. When you withdraw, the protocol takes another 5%.
Where does this 5% go? Well, to existing TRUMPET holders. As I said, this is the most blatant example of the Ponzi-style economics of the protocol. No external yield, the newest entrants enrich solely the prior entrants, and it’s impossible to break even without more capital coming in from new investors to make up for the 5% loss on entry and exit.
But that’s not all. There’s also a mild lie on the Trumpet page on the official website. Bankteller (BT), the developer of the project, has made the claim that the contract for Trumpet is “100% immutable with zero administrative functions.”
This is a slight lie. Although the contract doesn’t have administrative functions that can drain the TRUNK deposited, it does still have an owner wallet:
And the owner wallet is eligible to call the withdrawNonStableToken function, which allows the contract owner to withdraw any non-TRUNK token from the contract.
So while it’s true that “single sided liquidity is locked in the contract” in the sense that BT can’t withdraw the backing for TRUMPET, he can withdraw any other token that makes its way to the contract, and that includes funds accidentally sent directly to the contract by unknowing investors.
ELEPHANT Token & Primary Treasury
The ELEPHANT token is just another example of the protocol’s lack of sustainability, and roundabout ways of disguising what is effectively just another Ponzi style economic system.
The token has 4 sources of buying pressure; the purchasers of the ELEPHANT token directly, minters of TRUNK, “unlimited” NFT buyers, and depositors into the Futures system. So, let’s break that down.
The ELEPHANT treasury has multiple sources of capital, and 2 primary things it must pay out with that capital: Futures, and unlimited NFTs.
Futures investors are depositing capital that’s buying ELEPHANT, but the liabilities for Futures are always higher than the assets the protocol receives, as I explained in the earlier section about Futures. Remember, Futures generates no other income, so the protocol is always paying out more in the end than it receives:
Okay, let’s do the NFTs now. If you remember correctly, the Unlimited NFTs do not provide any kind of external revenue to the protocol, but they have a quite literally endless liability that they create for the protocol.
Sure, the ELEPHANT token just got 2 BNB in buy volume, and the treasury just received all of that via purchased ELEPHANT tokens, but in the future, the protocol will have paid out all of the ELEPHANT it originally acquired, and will still owe the investors in the NFTs more money.
So this outflow is also a larger liability than its initial assets deposited.
So what about direct buyers and TRUNK minters? Well, as explained earlier, the systems of the protocol that use TRUNK are fundamentally unsustainable, as they always owe more than they bring in.
TRUNK minters are giving their BUSD to the BUSD Treasury, but 10–50% daily of those funds are being used to buy ELEPHANT, which means the BUSD makes its way to the liquidity pools. And remember how Futures sells ELEPHANT from the treasury to acquire BUSD for its 0.5% daily interest? Well, that just means that the interest being paid to Futures depositors is going to slowly drain away the BUSD added to this pool.
Direct buyers are still expecting a return on their investment, so they will want to cash out at some point. If the protocol is slowly draining the liquidity to pay out investors from Futures, those investors will naturally have less money to cash out over time, even if none of the direct ELEPHANT holders sell their tokens themselves.
Oh, and because I of course can’t ignore this aspect of the ELEPHANT token; it has a tax system. This means that transfers, buys, and sells incur a tax, half of which is redistributed to the liquidity pool, ~25% makes its way to existing ELEPHANT token holders by evenly distributing it across the entire supply, proportional to the holdings of each wallet, and the other ~25% makes its way to the Elephant Graveyard, through the same process.
The remaining ~50% makes its way to the liquidity pools, which is pretty pointless, considering the fee is about 10%. So 5% of the user’s original position is used to back the remaining 90% they have after tax when they want to sell. 🤦♂️
The Graveyard is a pretty pointless system that actually produces constant downward pressure on the price of ELEPHANT, practically equivalent to the effects of selling the token. It always holds ~50% of the total ELEPHANT supply at any given time. When the Graveyard gets over 51% of the total supply, it sells off that 1% directly on Pancakeswap for BNB. Sure, it does then take more ELEPHANT and pair it with the BNB in the pool, but it didn’t actually do anything to “scale liquidity” as the documentation says it does.
The BNB in the pool is the exact same as before, but the ratio of BNB to ELEPHANT is now lower, since more ELEPHANT has been added to the pool. This means the price is calculated as being lower by Pancakeswap’s internal oracle, and thus, investors lose money.
For example, if there’s 1 TOKEN and 1 BNB in a pool, the value of TOKEN is equal to BNB. If you add another 1 TOKEN to that pool, but aren’t adding any BNB, then the ratio might be 2:1 instead of 1:1. Now, the value of TOKEN is only worth 0.5 BNB, as there’s 2 TOKENs splitting 1 BNB in value.
And as for the evenly distributed rewards paid to current ELEPHANT investors, it’s essentially identical to the TRUMPET mechanism from before. You lose money when you enter and exit, and the only way to make that money back is for someone else to lose money, either by entering or exiting, and paying those fees. No external revenue source, investors in ELEPHANT simply pay the yield for all the other ELEPHANT investors, but have no guarantees that they’ll even exit with more ELEPHANT tokens than they started with, let alone actual money in another preferred asset from selling through the LP.
The Herd (Partner Network)
Contrary to what I think people may assume, I don’t think the “Herd”, or referral systems more broadly, are bad systems to have in any protocol. A lot of people reference MLMs as a way to discredit the entire idea of referrals, but I think that referrals do have their place when they’re not advertised to investors/users/sellers as a primary form of doing business or earning a yield/income, the majority of the time.
The Herd gives a relatively small bonus of about 0.5%-1% in rewards to the referrer based on the actions of their referred users, and that’s about it. I don’t think this part of the protocol warrants any major criticism.
Wrap Up
Let’s take a step back.
This is the Elephant Money ecosystem. All money in the project flows through these different elements. Even if all but one were money losers, with more liabilities than assets, but that one could provide for them with external revenue, the project would be sustainable, and in my opinion, not a scam.
So let’s go down the list.
Unlimited NFTs
No external revenue.
Infinite ongoing liabilities from a finite deposit.
Not Sustainable.
Futures
No external revenue.
Infinite ongoing liabilities from a finite deposit.
Not Sustainable.
Stampede
No external revenue.
Infinite ongoing liabilities from a finite deposit.
Not Sustainable.
Farms
No external revenue.
Infinite (Albeit, lower than the others) ongoing liabilities from a finite deposit.
Not Sustainable.
TRUMPET
No external revenue.
No fixed liabilities, but can’t physically even offer more TRUNK tokens out of the contract if enough users withdraw, while implying that all users can eventually make a profit, thus the yield is...
Not Sustainable.
Graveyard
No external revenue. (Income is still from other investors losing money, via taxes)
Doesn’t have any liabilities, as it’s not promising money to investors, but its use of assets is a drain on the token price that doesn’t need to exist, and harms the protocol for no fundamental benefit.
The Herd
Effectively external revenue, as it’s commission based for bringing users in, not based on user capital deposit value.
Has variable liabilities that can be paid, but its liabilities are paid for via further losses to the rest of the protocol.
In Summary…
I think that says it all. Not one of Elephant Money’s investment strategies have any form of external income. It promises users a yield that it simply does not have enough true assets to pay out to everyone receiving it.
I believe this long-standing statement in the crypto space still stands true.
“If you don’t know where the yield is coming from, you are the yield.”
Now I understand that there may be a few things that people think I’ve left unanswered, so here’s a rapid-fire round of quick Q&A’s, mostly for Elephant Money investors who already know certain things about the protocol and might have critiques about my reasoning, or what I’ve included.
Why are taxes on transactions not a valid form of external income?
Because they take from new investors as a form of yield for prior investors. Everyone depositing/buying wants to make a profit, but the newest entrants already lost, and can only make it back if more people lose after them.
What about the Farmer’s Depot?
Users are buying TRUNK for less than it’s worth on the protocol’s end, meaning less BUSD overall makes its way to the protocol. Either the protocol effectively counters the inflation from the TRUNK it mints and gives to investors by having more BUSD in the LP from buyers on Pancakeswap, or it gets the BUSD directly and uses it to effectively pay the same people the same amount of money, minus the discount it just gave.
It’s a drain on the protocol, albeit, a very minor one.
What about the Unlimited NFT marketplace fees?
They won’t recoup the cost of paying out the holders, as the liabilities still total to an infinite amount, given enough time. They will continue to drain the treasury until there’s nothing left to drain, these fees just slightly slow that process down.
What about the rate-limiters, maxes, and payout limits on things like the Stampede?
These just slow down the negative downward processes that take place. They don’t stop them. Furthermore, limits and caps on withdrawals/earnings can just be bypassed by making a new wallet. If you think whales that will get close to these limits will voluntarily limit their own earning potential by keeping everything in a wallet that’s hitting caps and earns a reduced yield, you’re not seeing reality.
Wouldn’t fees from protocol-owned liquidity be external yield?
Yes, technically (especially transactions routing through the pairs with an end destination that isn’t Elephant Money, and only if it isn’t the only source of external yield, which means the entire utility of the tokens is just to provide liquidity for itself)
However, those earnings from fees are minuscule compared to the yields the protocol has to pay out, and will be quickly lost.
How do you propose we fix this, then?
I don’t think the current state of the protocol is at all salvageable, but here’s how I think it could at least become relatively sustainable, even if its function would then probably be less of a good deal for investors compared to other actually sustainable protocols.
- Put idle Farms assets to work. Lending markets exist, (i.e. Radiant Capital, Venus, etc) and they can pay an interest rates on hard assets like BTC, ETH, WBNB, and more, while farms deposits are earning yield. The yield earned on a Farms “pool” should be roughly equivalent to this yield, with TRUNK rewards being backed by the assets earned (swapped to BUSD, then re-deposited into the lending market to keep earning more backing)
- Kill off TRUMPET. (It has no functional purpose, and all yield is just redistributing money from the newest investors to the prior ones)
- Kill off the Graveyard. Simply burn 50% of the supply in a custom-built contract that either doesn’t receive rebase rewards, or accounts for it by setting the rebase rate overall to a higher value to account for the portion it’s taking.
- Reduce taxes. High taxes acting as a form of yield are just a tool to move the same amount of money between investors, while telling them all they’ll make a profit. Small taxes, (i.e. 0.1%-0.5%) can act as an incentive to continue to hold without being designated as a source of “yield.”
- Stampede should have a rewards rate that’s fixed to the value of TRUNK’s BUSD backing deposited in the lending market as explained earlier. It could additionally provide a small incentive for users to use Elephant money instead of the lending market directly by providing a small bonus yield paid in ELEPHANT tokens.
- Unlimited NFTs should be shut down. Pay off existing holders in full and cut off revenue. They’re an endless drain on the protocol in exchange for limited, one-time capital deposits.
- Convert Futures into another proxy for BUSD on a lending market, with an interest rate to match.
- Give ELEPHANT a share of the yield earned on the backing for TRUNK, and Farms assets, to incentivize holding. Also add simple governance for assets in the Elephant treasury to allow for the token to hold value simply due to its ability to control other assets.
These changes would remove aspects of the protocol that are just a drain, and would provide real yield from external sources (lenders being provided a service from investor’s capital).
The problem is, while sure, these would make the protocol somewhat sustainable, it won’t really be that good of a deal for the investors. Elephant Money simply… isn’t needed in the first place when there’s other options out there that actually pay yield from real sources.
Who are you to tell me what to do with my money? Why should I believe you?
I’m just a random person on the internet. You don’t need to do what I tell you, this is crypto after all. That’s sort of the point. However, I would hope you can at least understand the information I’m providing, and how it shows the protocol simply can’t pay you what it promises as time goes on.
I’ve been in this space for over 8 years now. I’ve watched multi-million, and even multi-billion dollar crypto empires fall, from Terra, to Celsius, BlockFi, 3AC, Genesis, FTX and countless others. I’ve seen hundreds of millions of dollars rugged. I’ve watched people lose hundreds of thousands of dollars in savings after ignoring my, and others’ prior warnings.
Not once have I been scammed, phished, hacked, rugged, or lost money to a fraudulent business, yet every project I’ve warned against has either rugged, or crashed due to its unsustainable economics. I simply want to ensure nobody else has to end up in the opposite position.
And if you don’t believe me about anything I’ve said in this article, then don’t trust, verify. look at the transactions going in and out of these smart contracts, and decide for yourself if my diagrams are really explaining how these funds are moving.
Okay, what projects are legitimate then?
While I don’t want to just give out financial advice and tell you where to put your money, A few of the projects I personally invest in are:
- Staked ETH & Derivatives (rETH, yETH)
- AAVE (Governance token & Lending deposits in various assets)
- GMX (GLP)
- sDAI on Agave (Effectively a proxy for U.S. $ bonds)
- Radiant Capital (Another lending market like AAVE, omnichain through LayerZero)
- Stargate (LP & STG token)
- AMKT (Mostly comprised of BTC & ETH)
- BTC
There are a lot more that I believe are also legitimate, but I sadly can’t invest in them all. I do, however, plan to write more content on existing, brand new, and upcoming projects in the crypto space in the future, if you’re interested, of course.
When does this Q&A section end?
Hey there, you’ve reached the end!
Thank you for making it this far, and I hope you got a new perspective on the protocol, whether you’re an investor, or just someone who stumbled on my article and wondered why people were investing in tokens named after elephants.
If you were wondering which tools I used in the making of this article, here they are:
Diagrams:
- Obsidian (Canvas feature)
Block Explorers:
Wallet RPC & Address Spoofer (For viewing & testing balance information during research):
If you’ve got any questions for me, or would like to open up a dialogue about a specific concern or concept, the replies button should be somewhere just below here on whatever device you’ve read this article on.
As always, thanks for reading, and stay safe out there in the wild digital world that is crypto.
