IGknight’s Roadmap 01: Beanstalk-Part 2
Previously, we introduced beanstalk and discussed its revival plan post its on-chain attack. We’ll dive deeper into the economics of the model and hopefully find out if the protocol is investable!
So… Do Field and $BEAN really work?
Below are plots from Dune analysis for Beanstalk(https://dune.com/tbiq/Beanstalk).
Price + Market Cap
This is the $BEAN price and market cap chart since its launch. As you can observe, it was volatile at first time, but it seems to be pegged as time passed. Also you can see that the market cap was increasing very fast. Also you can see, price difference is correlated to market cap movements. If the $BEAN price is below $1, Beanstalk reduces $BEAN’s market cap. On the other hand, if the $BEAN price is over $1, Beanstalk increases $BEAN’s market cap.
Debt Ratio + Pod status
This is a chart that shows the debt ratio. You can see there are a few moments that debt ratio shows big movement. Pay careful attention to the market cap, you can see that the market cap has correlated big movements to the opposite direction, which means the algorithm is working pretty well.
Pod status tables
This is a table showing the Field transactions in the early stage. Weather was 100% ~ 200%, and Pods were harvested in about 2~3 months on average.
This is a table showing the Field transactions right before the exploit. Weather was over 3,000% but the Pods were not harvested for over 5 months.
It seems Field did work and users did earn a huge profit. Also, debt ratio decreased when market cap increased. If the market cap continuously increases, Pod holders’ maturity can be shorter than 1 year and take 30 times of principle.
Conclusion
On the surface, this looks good and many users earned juicy yields from Beanstalk. But the problem is that the yields are too good to be true — how long will this yield last? Let’s assume there’s no more demand for $BEAN. Then, $BEAN price will de-peg under $1 and Beanstalk will be forced to increase the weather. This will spiral into users NOT minting more $BEAN to receive Pods. Since there’s no collateral and assets in this protocol, there will be no way to recover from this death spiral. This model is sustainable only when $BEAN’s market cap is always increasing.
On the other hand, if you think $BEAN’s market cap will increase significantly, it might be a good option for the short while. It only had a $170M market cap right before the exploit, if this goes anywhere near the size of FRAX, it has a 15x potential. Until it stops growing, there might be a significant window for profit…(reminds me of something)
So, Farm on it or not?
Let’s do some math. As Beanstalk announced, there will be a $77M OTC deal with 500%. which means, $385M debt. ⅓ of new $BEAN will be distributed, so about $1B of new $BEAN needs to be issued to repay this debt.
It’s hard to estimate the exact time this can be done. For about 8 months, the total harvested amount was approximately $46M, which means there was about $90M of new $BEAN. Assuming that the harvesting amount will be increasing linearly, we can estimate that it will take about 6~7 years to repay, which translates to around 80% APR. It looks great, but there are a few things to consider. If you want to exit your position, you are likely to be forced to sell it at a discount + nobody knows the future discount rate of the Pods in the first place.
On the other hand, if you have some belief that the crypto world eagerly wants a new type of stable coin and that hype will lead to $BEAN, it could be an investable option(?). But with the current market conditions and what’s happening with stablecoins (especially algorithmic stable coins), you might want to search for alpha elsewhere.
Be smart when you invest! This is no Financial Advice Sers!
To read the previous article, the link is below!
