Hey wizards, in the following days we’ll release the details of what Elexir is going to be! To kick things off, let’s start with the Genesis of Elexir 🌈
🌈 “Genesis” — Introduction
“Good artist copy, great artists steal”
Liquidity pool. Yield farming. Lending. Borrowing. Stacking…DeFi (Decentralised Finance) is exploding since the last 2–3 years and has been a thriving niche for many investors! Though the barrier to entry has historically been quite high to open the gates of DeFi. As any innovations it followed Roger’s innovation curve. First enters the innovators and builders that adopt this new (and sometimes scary) tech and then slowly becomes more and more popular as the tech is becoming more robust, accessible and trustworthy. We believe DeFi is still in its infancy compared to its potential due to obvious lack of accessible UX, obscure tokenomics and overall lack of investor education. Our goal is to help as many people get on this train through seamless UX, understandable tokenomics and joyful experiences.
Fast forward 2021. As 3 DeFi passionates, we’ve been following the impressive growth in this space since 2 years and caught up some trends that we believe makes it an excellent time to market.
- ️🖼 NFTs: Digital ownership has found its vector of adoption. Onboarding a broader audience to non fungible tradable assets, supply/demand law and the importance of building utility in an ecosystem to maintain value.
- ✌ ️DeFi 2.0: OlympusDAO paved the way to a paradigm shift in DeFi called PCV/POC (Protocol Controlled Value/Protocol Owned Liquidity). Fancy words to say that they own their liquidity on the decentralised exchanges which becomes a revenue driver and build a treasury of assets giving an intrinsic value to their tokens. Robust tokenomics, high APYs, game theory and a new way for protocols to bootstrap have been introduced.
- 🛎 ️DaaS (DeFi as a service): In an overcrowded way of possibilities, new protocols have started to offer a simplified entry to DeFi through a black box model. Invest once, the protocol does the heavy-lifting and redistributes the rewards to holders through yield in their token. Despite unrealistic APYs and fragile tokenomics, the simplicity of the mechanics attracted a large crowd in adopting DeFi.
- 🕹️ GameFi: At the crossroads of DeFi and games, protocols like Axie Infinity managed create the P2E (Play 2 earn) model. Using gamification to incentivise behaviours and reward players with tokens. A seamless way to create a fun abstraction on complex concepts and reward holders based on true interaction with the protocol.
Elexir aims to be a high-yield DeFi protocol that lives at the crossroads of these different trends and build on-top of models that have been experimented and tested on the market. Mixing the power of NFTs, the robustness of OHM, simplicity of DaaS and fun of GameFi.
Please, don’t call us a fork or we’ll Abracadabra you out of space ✨.
😳 “Sparkle” — Common Issues
“Fundamentals stay fundamentals”
With the goal of building a more accessible and trustworthy DeFi protocol we took a step back in all the fuzz around nodes, reflection token, ohm forks, etc.. and tried to understand strengths and main failure points in order to build our tokenomics — reverse engineering style! Which behaviours do we reward? Which one do we limit? Is it actually sustainable?
Seemingly complicated concepts and high entry costs
Trust us, we were there too. It took us some time to wrap our heads around the whole ecosystem and be able to simply understand how it works under the hood.
Most protocols in this space are using fancy terms either without even understanding it or to sound smarter than they are. Honestly the only thing this is doing is projecting false information and misaligning the protocol and its users.
In the goal of bringing the most people on board, we believe it’s a major issue! Basically, we have a leaky bucket of investors afraid, to approach that space simply because they don’t get it.
✨ That’s why we believe in gamification. As a way to sparkle their interest, lower the barrier to entry, use simple terms and build mental models of complex systems in an entertaining way.
Unhealthy initial growth & unsustainable APYs
Would you prefer one candy right now, or 2 candies tomorrow?
Whatever your choice, the question only makes sense if I honor my promise so be careful.
The term APY is now familiar in DeFi, but unfortunately used awkwardly and generally doesn’t mean much anymore: it’s just there to attract naive and greedy mercenaries.
Yep, we are in 2021 and 1,00…000…0% APYs are the norm. Although it sounds crazy, it doesn’t stop the protocols from accumulating millions in liquidity (total value locked). But does it really make sense? Inevitably, it is clear that we are dealing with a perverse use of DeFi, and specifically governance tokens, that makes farmers excited but the value of the token…greatly diluted.
Let’s get one thing straight about these huge advertised returns:
- An APY is meaningless if it is not maintained for a year — Most protocols advertise high yields, but are not able to maintain them for more than 1 month.
- An APY is meaningless if we do not take into account the token price and dilution — rewards are usually expressed in number of native tokens, but the number is not the value. One token today will not have the same value tomorrow if trillions are printed everyday without any concrete value backing. It is simple supply/demand law.
- APY accounts compounding interest over a year and this is rarely the case. The actual value you should really look at is APR, which is a constant rate (you can divide it by 12 and get your actual monthly returns). APY is just a big marketing number to attract the masses. We don’t have anything against it. But you should know it.
In short, we want to alert you to the misleading use of certain metrics, and warn you about the importance of the durability of a protocol so that it can be considered as a real generator of passive income.
✨ Sorry, we won’t have quadrillion APY. Because we want to make it sustainable. Building a stable treasury and having clear and transparent metrics will be our priority. We believe that giving simple access and understanding of the data through our dApp will be a strong leverage to help the community understand the tradeoffs to make this thing sustainable.
High volatility — Pump, dumps & whales
“I’m making 2k a day with my noooodes! *Sleep* Shieeet it dumped 90%”. Why? It’s easy.
- Early entrants enter the protocol, while price is low, acquire massive share of the token/nodes supply
- Print some tokens
- Price goes up
- Dump
- Price goes down
- Repeat
The current state of passive income protocols are so much focused on making their protocol attractive in the early days that they build a way too permissive tokenomics. The APY is constant whatever the price action, users can claim whenever they want, supply of nodes is unlimited, etc..
✨ Building for sustainability means thinking twice about tokenomics and implementing simple limiting rules that makes sure we can maintain the treasury afloat to feed everyone. There is no free-lunch.
Mechanisms like cool downs and claim limitations on our yield-producing assets are answers to that.
Trust issues in the DaaS (DeFi-as-a-Service) ecosystem
You know the drill! After OHM season came nodes season. Started after the traction of the $RING model with their punchy tagline “earn 125654352442% APY life-time”. Came along a crowd of cash-hunting copy-cat forks and the battle for the most ridiculous APYs and BS differentiation started. Now what? Unsustainable APYs, reduction of APYs for the best, rugs and price dumps for the worst. Making unachievable promises only erodes trust in the protocol and at its core everything is about trust in a high-speculative, low maturity market.
Trust is a fragile thing. Easy to break, easy to lose and one of the hardest things to ever get back.
✨ We preferred sitting on the sidelines, letting the market do its filter to bring to our community promises we can hold.
Sustainable APYs, public roadmaps, future team KYC/audits and open communication routines with the community will back this up.
Oooook! Now enough with the theory, let’s get into the cool part! How do we intend to improve those limitations?
*BOOOM ⚗️💥*
Sorry Wizards! Need to get back at my cauldron! In the next part, we’ll get into the details of what our mechanisms are — “The Lab”. Stay tuned 🔔
