# A few points on the upcoming Scarcity migration

## If you hold Scarcity, read this

As per the recent DegenVC announcement, we’re planning to launch Behodler 2 on Friday 19th February. This launch can be considered the equivalent of Behodler coming out of beta: optimized gas consumption, support for exotic token types and flash loans to name a few improvements.

Instead of running Behodler 1 alongside Behodler 2, the choice has been taken to rather migrate all of Behodler 1’s liquidity to Behodler 2. As such, we need to launch a new Scarcity token to replace the old and will be introducing a permanent conversion contract to swap Scarcity 1 for Scarcity 2 at your leisure.

## Will my SCX retain its \$ value?

This is the question at the top of all existing SCX holders’ minds and the answer is both yes and no. Below I’ll cover each.

## YES

The total SCX produced from the migration will have the same dollar value as the total SCX in Behodler 1 which means that if you take the total dollar value of all liquidity and divide it by the total supply of SCX and then multiply by your balance, the number you get will be the same both ways (minus a percent or two for the pyrotoken fee).

## No

This part is a little more technical so I’ll give a long answer and then a TL;DR. Behodler 1 SCX is generated along a square root curve of the input token. Suppose we have two tokens, token 1 and token 2. Let T1 be the balance of token 1 in behodler and T2 be the balance of token 2 in behodler. With a bit of equation rearrangement, you can show that the marginal price of token 1 in terms of token 2 of is √T1/√T2.

In Behodler 2, SCX is generated along a logarithmic curve. Due to some nice log magic, you can show that the marginal price of token 1 in terms of token 2 is T1/T2.

I’ve noticed that the prices of the tokens in Behodler 1 have been arbitraged into accuracy. This means that √T1/√T2 gives the same number on Behodler as the price you’d get if you observed those same tokens on Uniswap or a centralized exchange.

So let’s say that for Behodler 1, T1 is 256 and T2 is 64. This gives a price of √T1/√T2 = √256/√64 = 16/8 = 2. Given profit seeking arbitrage, we can assume that 2 is the market price.

Friday rolls round and we migrate all the liquidity across. We know that for Behodler 2, the relative price is given by T1/T2. Plugging in the above numbers, that gives us 4. However, nothing has changed in the markets. So we can now make an arbitrage profit by buying token 1 on uniswap for 2 of token 2 and selling it on Behodler for 4.

Unfortunately there’s no avoiding this situation so as soon as Behodler 2 goes live, expect arbitrageurs to move in and correct all the prices through such trades. I can’t say what the net outcome of all this price shifting will be. Two effects will compete. On the one hand, Scarcity will likely burn and so rise in value. Keep in mind that even though SCX doesn’t have a fixed redeem rate, burning raises its value for the exact same reason that burning WeiDai raises its value. On the other, sudden arbitrage corrections of this nature are known as impermanent loss on Uniswap and while Behodler reduces the impact of IL, this across the board IL is not the usual case.

So in the end, expect something to happen to the value of your SCX but it is very unlikely it will stay exactly the same. If it does drop in value, my advice is to HODL for 3 reasons:

1. The lower gas fees on Behodler 2 combined with the upcoming liquidity queueing mean that far more liquidity will be able to profitably be injected into Behodler 2 than Behodler 1. This automatically raises the value of SCX.
2. It’s no mistake that I equate this tectonic movement in trading activity to impermanent loss. Regular trading will ensure that this becomes increasingly impermanent. The time it takes to restore your SCX to its original value or higher is not possible to determine, though.
3. I’ll be HODLing my SCX so consider my advice to come with skin in the game.

TL;DR your SCX will probably change in dollar value from Behodler 1 to Behodler 2 but this change will likely be impermanent.

## A final note on downside protection

Scarcity burning is the main way you can hitch a ride with the growing pool of liquidity. However, if you’d like to protect yourself from bear markets, I’d also recommend acquiring pyrotokens. Amongst other things, pyrotokens rise in value when dumped. In other words, during bear markets, they redistribute value from dumpers to hodlers. This mechanism is intentional and meant to confer a certain antifragility to pyrotokens.

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## More from Behodler Liquidity Engine

Behodler DEX is a next-generation liquidity protocol that using omnischedule token bonding curves.

## Justin Goro

Creator of WeiDai and 92 times emperor of Tsuranuanni