Pickle.Finance is the biggest dill since YFI. Learn Why
Yield Farming is the new ICO, with millions of dollars being pumped into them in hope of creating a new YFI-esque bubble that will pop as soon as the food coin is worth more than a house.
Recently, “Pickle Finance”, an anonymous group of developers has emerged as the new item on the food court. They’ve started their own version of YFI vaults called “pJars” which is a product that might make Pickle worth more than YFI itself.
Scroll down for more hopium, but first an overview of the state of being a yield farmer and the problems Pickle is trying to solve.
Just like the rest of us, two weeks ago you were not sure what the hell it was, but you know there are other people who want to get into yield farming, so you decided to join them.
After paying more gas fees than your actual car, learning about Impermanent Loss the hard way, and even the whole “I did not intend to do any harm” apology from the founder who rug pulled 14M from his own project, you finally arrive at the conclusion that yield farming is an elaborate scam designed by whales and the Miner Mafia.
So you lose hope in it, and you just sell off your last bits of Sushi and Shrimp and pray you don’t get a letter from the IRS. The problem with 99% of the yield farms, is that there is no product.
And as Mr. Wang famously said: “If you’ve spent 2 days farming yields in DeFi and still don’t know where the yield comes from, you are the yield”
This is why I wanted to talk about the boom in TVL with Pickle Finance. People are sticking around for the product it is offering, and not dumping it on the market as fast as you would expect for your typical food token.
TVL — What is it and why it matters for DeFi projects
TVL, or “Total Value Locked”, is the term that is used to measure the adoption of a DeFi product. It measures the USD value of the tokens that the smart contract is in control of, similar to AUM for financial institutions.
CoinGecko uses this as a metric divided by the market cap to create a way to see which product might be overvalued. For example, YFI has a Market Cap / TVL Ratio of 0.82.
This means with a market cap of 782M the morning of 9/25/2020, it has 641M “locked” in YFI vaults. If the same ratio was expected of Pickle at a 26M market cap, it would have 30M in locked in pJars and its farm.
Instead, Pickle is punching above its weight class with 163M TVL, giving it a Market Cap / TVL Ratio of 0.16! This is over 5x lower valuation compared to YFI. Although this metric is not perfect, it is a clue to how the market is treating Pickle.
The massive TVL compared to the market cap bodes well for Pickle. Of course, there might be a slight drop off when the rewards per block drops to 1, but so far the halvings that occur every week has not slowed down the overall growth of TVL. In fact, inflation might be the edge Pickle needs to become a bigger success than YFI.
Inflation — Pickle’s Secret Weapon?
Inflation is not inherently good or bad, it is merely a market phenomenon. In a fiat system, the government prints currency and uses it to buy goods and services from businesses.
In Pickle, 75% of inflation is used to pay liquidity providers for PICKLE-ETH so it is easier for people to enter & exit without crashing the prices. The other 25% of block rewards go to pools of tokens that are being stabilized in pJars. Since these rewards vary depending on how stabilized the asset is, incentivizing farmers to deposit more of the struggling stable coins. (For example, if Tether is at 0.99, the farm will yield higher than DAI at 1.01)
You can read more about the inflation of Pickle here, but the TLDR is that by the end of this year, around 1.3M Pickles will be in circulation, with low inflation (1.29%) every year after that.
It’s a self fulfilling cycle where the more successful it is in stabilizing the market, the more successful it becomes. This is a tool YFI doesn’t have, because it refuses to increase the cap of 30,000 tokens. It will have to rely on other strengths to succeed in the market, namely the massive TVL and the brains of Andre.
Pickle and YFI — Friend or Foe?
There are two possible ways to look at all of this. One, these projects (YFI & Pickle) have enough in common that it would make sense for them to team up, or worse go to war with each other over yield.
But I believe both sides will follow Peter Thiel’s advice when he says: “Competition is for losers”. Pickle is trying to carve out its own niche, while YFI will continue building the Berkshire of Blockchain. The singular focus of Pickle, which is to stabilize rather than create a conglomerate of DeFi products, will help Pickle gain market share in a brand new space.
The funny thing is, Pickle’s whole business model is based around inflating assets. Bitcoin and YFI are going to be valued for how much cash flow per token is created, while Pickle will be judged on how many assets they have stabilized. Two different metrics, two different outcomes.
What is Pickle, and what is a pJar?
The stated goal of Pickle is to stabilize the stablecoins, with its slogan being: “Off peg bad, on peg good”.
When there are billions of dollars floating the digital economy of Ethereum, there is a desperate need for a stable asset. Tether was the first to go mainstream with the stablecoin idea, but soon Coinbase, Tether, Gemini and MakerDAO and others joined the party.
They all want to have the deepest pool of money, with the least fluctuation in pricing. pJars, if successful, would bring a lot of value to DeFi by making sure the different stablecoin pools can be balanced. pJars do this by arbitraging stablecoins for profit, using a forked version of YFI’s vaults.
Eventually, it would make sense for these stablecoin operators to work with Pickle Finance directly and even pay them to make sure their digital dollar stays on the peg of 1.
Paying Pickle a few million would be worth it, if it could mean the difference of market domination or failure. A stablecoin that stays under/over the peg for too long is doomed to act as a true digital dollar.
The market would be able to grow, without the inherent inefficiency of real world markets. It would mean billions, and eventually trillions of dollars in stablecoin could be moved about the world with ease, with no risk that they would not mirror their real world value.
This is why there has been so much excitement by a small group of farmers on the Pickle discord over the past few weeks, and why we haven’t seen the price of Pickle dump like the rest of the food tokens — the farmers are holding their Pickles for a higher price.
Pickle not invited to the Party?
It seems that for a two week old project, Pickle has a lot of momentum. They have actual product users, a working product and a solid team of developers. There is definitely promise here.
But there are a few things holding it back. For one, DeFi Pulse refuses to add Pickle to their ranking list, which would put Pickle in #13, right behind CREAM Finance which is valued at 33M. The reason given is that Pickle has not done an audit yet, which the team is working on behind the scenes. CoinGecko, for the same reason, will not put the market cap valuation until the project is listed on DeFi Pulse. It’s a chicken and egg situation, but eventually it will sort itself out. It does seem Pickle is treated differently than other, less vetted projects in the space.
Feel free to tweet @scott_lew_is & @tmlee to let them know you would like to see more Pickles on their sites.
A majority of the volume is coming from Uniswap, and there is speculation that Pickle will be the first food token listed on Coinbase, but it is all a theory for now. Even though Pickle has not been embraced by any of the “Dot Eth’s” on Twitter, or the CEX’s like Binance or Coinbase, Pickle developers continue unfazed, building out new features at the speed of light.
To get to the billions of dollars these projects want in TVL, they are going to need more users. And the fastest way to get more users is to create a massive amount of value for people. Your average Joes and Janes aren’t going to jump on the crypto band wagon, if they don’t see a reason to. In this case, that value comes in the form of pJars that generate more interest daily than their bank account does in a year.
DeFi isn’t a revolution, it’s an evolution. A utility taking away the need for a revolutionary mindset, because most people just want to pay their rent & eat.
The future success of Pickle will depend on the performance of pJars. If Pickle succeeds, it will be because the pJars model holds, which is why Pickle has been focusing on stablecoins to begin with.
Stabilizing billions of stablecoins is a huge job in itself, and would probably make the product worth billions of dollars long term. But the ambitions are deeper than that. Stabilizing all synthetic assets across the blockchain, would be the ultimate success for Pickle and bring balance to the Wild West of crypto.
The next big release for Pickle is “Blue Pickle”, and the Discord Pickle Privates are speculating on what it could be. I predict it will have something to do with stabilizing yUSD, but there are other theories as well. Generating yield from stale assets like BTC and stable coins might be the killer app crypto has been waiting for, but is it sustainable?
Join the conversation to learn more about the specific details on how pJars work and what is in store for the future!