Introducing the DFV Crypto Basket

DFV is your easy access to outperforming cryptos.

TLDR:

• DFV is DAM’s first decentralized crypto basket.
• DFV aims to de-risk your crypto exposure with a basket of value cryptos.
• DFV includes wBTC, SUSHI, SNX, wETH, REN, OCEAN, PUNK, AXS, and wSCRT.
• You can participate in DFV through DAM’s website or directly through SushiSwap.

Deep F. Value (DFV) aims to de-risk your crypto exposure in a curated basket of value cryptos with compelling value propositions.

Tokens within DFV’s diversified ERC-20 basket seek to meet four requirements:

1. Token has clear utility value.
2. Project behind the token has an attractive valuation.
3. Project behind the token has technical credibility.
4. Token has sufficient liquidity.

Proposed changes to DFV are subject to DFV token hodler voting on a monthly basis, and in terms of costs, DFV carries a 0.75% exit fee.

DFV is ideal for individuals looking for easy, de-risked exposure to value cryptos that are positioned to outperform over the long-term.

The rest of this article expands on DFV basket requirements and tokens.

TOKEN REQUIREMENTS:

1. Token Has Clear Utility Value

DFV will only include tokens with clear utility, and avoid any governance-only tokens.

Governance-only tokens, especially when wallets are concentrated, arguably have little value.

Of course, hodling these types of tokens can be a nice way to show project support, but price movement is driven exclusively by sentiment and speculation.

DFV, therefore, aims to include tokens that will benefit from tangible use case demand beyond governance such as:

• Gas fees for Ethereum transactions require ETH.
• Earning SushiSwap dividends from DEX usage by hodling SUSHI.
• Earning transaction fees on RenVM by staking REN.
• Participating in the Synthetix derivatives market requires staking SNX.

Tokens with utility value often have less downside and are signs of projects with sustainable business models.

2. Project Has An Attractive Valuation

DFV considers valuation through comparables, projected cash flows and precedent acquisitions to help determine a project’s upside. Examples within DFV include:

• Bitcoin (wBTC) currently represents only 10% of gold’s market share. [1]
• SushiSwap using the dividend discount method is more than 5x undervalued. [2]
• Gaming universe Roblox has nearly a $40bn market capitalization, or more than 60x greater than Axie Infinity. [3]
• Secret Network is the only functional privacy-enabled layer-one platform and relative to other layer-one networks and privacy projects, is at least 10x undervalued.

Favorable tokenomics also signals a project’s long-term viability and reduces the risk of price volatility. Key characteristics are:

• Disinflationary monetary supply and / or fixed supply caps
• Community hodling a majority of tokens
• Limited wallet concentration
• Absence of unsustainable reward schemes

As we study the flood of institutional capital into crypto, traditional investors are more comfortable participating in quantifiably undervalued projects since they can fall back on familiar valuation methodologies versus needing to acquire in-depth technical knowledge.

3. Project Has Technical Credibility

Token utility and attractive valuations mean little if projects have poor technical fundamentals.

One of the beauties of crypto is the prevalence of open source software and communications, including how project participants interact with community members.

DFV seeks to incorporate projects with strong technical foundations and commitment to ongoing development. This is assessed across several areas.

• Review of security audits and independent code reviews
• Clear governance procedures
• Coherent network topology
• Evidence of technical contributors
• Community-driven product roadmaps and technical partnerships

Bonus points for projects that DFV uses or plans to integrate with in the future (e.g. ETH and SUSHI).

4. Project Has Sufficient Liquidity

To enable sufficient liquidity in DFV and its underlying collateral, DFV aims to include tokens with fully diluted market capitalizations of $100 million and meaningful DEX liquidity pools.

DFV TOKENS:

wBTC — 21.5%

In the words of Satoshi Nakamoto, bitcoin exists because central banks can’t be trusted not to debase fiat currency.

By way of example, more than 25% of all US Dollars in existence were created since January 2020.

As your savings continues to be exponentially devalued, bitcoin is the ideal asset to help safeguard your wealth due to its scarcity, security, incentive-structure and portability.

With the world’s largest funds investing in crypto, bitcoin will likely receive a disproportionate amount of institutional investment as few projects outside of Ethereum meet asset managers’ liquidity thresholds.

Similar to large-cap tech, this implies bitcoin will outperform the broader crypto market and with gold as a comparable store of value, its market capitalization has room to increase tenfold.

Since it’s not currently possible for bitcoin itself to migrate to the Ethereum blockchain due to network incompatibility, we need to use a ERC-20 compatible, fully-collateralized representation (wBTC).

SUSHI — 19.5%

SushiSwap is one of the leading decentralized exchanges (DEXes) in the crypto space.

As we’ve seen by the recent boom in decentralized finance (DeFi) projects, trustless and more accessible platforms can provide credible alternatives to existing financial services.

DEXes enable access to cryptocurrencies not yet listed on centralized exchanges and offer interoperability for projects like DAM and DFV.

In terms of competitors, SushiSwap is extremely undervalued relative to its largest competitor, Uniswap, in terms of total value locked to fully diluted market capitalization.

Unlike Uniswap, SushiSwap has a clear business model, distributes revenues to hodlers and has far less hodler concentration.

SushiSwap’s product development is also more impressive as it’s already extending its liquidity to the Polkadot and Kusama ecosystems, and delivering other decentralized finance offerings.

Of course, when a project is undervalued there’s usually a reason.

In SushiSwap’s case, the initial ‘pump and dump’ characteristics of the founding team left a poor first impression, however, the community has since righted the ship, starting with imposing a cap on tokens in circulation.

SNX — 19.5%

Synthetix is not only the leading decentralized synthetic assets platform for crypto derivatives, but it also enables trading for public equities and commodities.

As Netflix’s Ted Sarandos famously said about HBO: “we need to become [them] faster than [they] can become us.”

In that spirit, Synthetix is best positioned to migrate traditional finance to the decentralized world due to its market leadership, proven platform and community-led governance.

Why wouldn’t fixed income, stocks, and traditional derivatives — which are magnitudes larger than the crypto market — not want to benefit from increased participation, real-time liquidity and instantaneous settlement?

From a risk management perspective, we also appreciate that the platform’s synthetic assets are collateralized at least 500%.

In fact, Synthetix arguably has stronger risk management practices than most banks today.

wETH — 18.5%

Ethereum combines the best of Apple’s Apple Store and Visa’s payments network, and has a smart contract platform market share comparable to Google’s dominance in search.

Is it a coincidence that virtually every non-Ethereum smart contract platform builds connectivity with Ethereum versus the other way around?

Or, that DFV runs on the Ethereum blockchain?

Ethereum underpins a thriving economy of DeFi, creativity and commerce.

Incredibly, Ethereum is still undervalued compared to both Visa and Mastercard on a market capitalization to revenue basis despite having exponentially more growth. [4]

And while Ethereum has scalability and transaction fees challenges to resolve, this year’s upgrade and proposed deflationary changes leave it well positioned to maintain its market dominance.

Ethereum may even overtake bitcoin’s market capitalization in the coming years.

REN — 11.0%

While bitcoin is crypto’s undisputed store of value, there aren’t many opportunities to generate income on its network.

RenVM helps solve this problem for the ecosystem as approximately 2% of all bitcoin now resides on the Ethereum network.

For context, RenVM enables the transfer of bitcoin onto Ethereum in a far more trustless and scalable manner than alternatives.

It also integrates with other platforms such as Polkadot, Kusama and Binance Smart Chain.

In our view, having exposure to the de facto decentralized bitcoin bridge may offer more upside than bitcoin itself.

After all, legend has it that during the California Gold Rush, selling shovels proved more lucrative than mining for gold.

OCEAN — 4.0%

You’ve probably heard of Beeple’s record breaking digital art Non-Fungible Token (NFT) sale for $69 million. [5]

But what about data?

While certain NFTs can be labeled as speculative, the rise of Neo-Assets fuelling the Web 3.0 economy will only accelerate.

Ocean Protocol enables a decentralized marketplace for data, allowing creators, analysts and organizations to publish and transact on a per-insight basis.

In the way that cloud computing migrated to transaction-based pricing, Ocean Protocol enables the unbundling of information subscriptions to make data more accessible and scalable.

Pumpamentals aside, Ocean’s impressive cross-industry partnerships and presence within the Polkadot ecosystem will only accelerate platform throughput.

With centralized data marketplaces boasting valuations of more than $50 billion, Ocean has significant room to grow.

PUNK — 3.0%

Investors globally are pursuing scarce assets as stores of value such as collectibles and bitcoin to protect against fiat currency debasement.

CryptoPunks are the bitcoin of NFTs, and the original crypto collectible.

Launched in 2017 as a set of 10,000 algorithmically generated 24x24 pixels images by the London-punk inspired team at Larva Labs, Cryptopunks drove the creation of the ERC-751 standard for subsequent NFTs on Ethereum. [6]

While Beeple’s $69 million NFT sale gained the lion’s share of media attention, it broke the previous record set the day before by one of the nine CryptoPunks alien NFTs ($7.5 million). [6]

Interest in CryptoPunks was so strong that the world’s largest auction house is featuring CryptoPunks as a prominent fixture in its May 21st Century Evening Sale.

PUNK is a newly created NFT index of 5 unique CryptoPunks including: PUNK-BASIC, PUNK-FEMALE, PUNK-ATTR-4, PUNK-ATTR-5, and PUNK-ZOMBIE.

Interestingly, PUNK has outperformed both Bitcoin and Ethereum so far in 2021 (at the time of writing), and we believe the combination of CryptoPunks’ scarcity, intangible value to crypto innovation, interest from traditional investors and general awesomeness will continue to push its value upward.

AXS — 2.5%

Gaming is a highly lucrative industry and due to the nature of in-game purchases and assets, next-generation experiences are increasingly NFT-enabled.

Axie Infinity is a Pokemon-inspired, decentralized gaming universe that enables commerce for avatars, digital land, and tools for its virtual economy.

Similar to DFV, the benefits of plugging into the Ethereum ecosystem provide gamers more opportunity and liquidity, increasing incentivisation for adoption.

Axie Infinity’s growth and market capitalization to revenue ratio indicate that it is undervalued relative to centralized gaming platforms like Roblox (which has its own crypto) and Unity, both of which have 50x+ greater market capitalizations.

wSCRT — 0.5%

Secret Network is the only proven programmable privacy platform in crypto.

Founded by a team of MIT PHDs in 2015, Secret allows developers to build complex, decentralized and permissionless Web 3.0 applications while also protecting data privacy.

In other words, Secret enables participants to transact without broadcasting trade details to the rest of the network, eliminating the possibility of front-running and data leakage.

For mass adoption of DeFi and NFTs, many institutions and individuals will require this level of transaction privacy.

In the increasingly regulated realm of personal data, Secret is the foundation for new types of decentralized finance applications that better protect users and meet traditional institutions’ security requirements.

As evidenced by the latest capital inflow by some of the most well known crypto VC firms, we believe Secret should have a valuation of at least 5% of the DeFi space, implying more than a tenfold increase from its current valuation. [7]

Secret Network also enables cross-chain asset compatibility to Ethereum and Binance Smart Chain, with bridges being built to the Polkadot ecosystem.

DFV only has a modest allocation to Secret, as the liquidity on SushiSwap is limited, however, we hope this exposure increases in the coming months.

CONCLUSION

If you have any questions not addressed here, please join the conversation on Discord or Twitter.

You can participate in DFV through DAM’s website (disclaimer: we are still in the process of making minor website updates).

We will release another article later this week on how to participate in DFV alongside its formal launch, which will include front-end updates and the release of our public repo.

We hope that you join us on this journey of gaining easy access to a curated basket of value cryptos that are positioned to outperform over the long-term.

Sources: CoinGecko, Yahoo Finance, Public Filings, Project Documentation and DAM Analysis.

[1] Gold Hub, February 2021. Above-ground gold stocks.

[2] Bankless HQ, March 2021. The Case for $100 SUSHI.

[3] Yahoo Finance, April 2021. Roblox Corporation.

[4] Yahoo Finance, April 2021. Visa Inc and Mastercard Incorporated.

[5] The Verge, March 2021. Beeple sold an NFT for $69 million.

[6] Brave New Coin, April 2021. Christie’s Announce May Auction of 9 CryptoPunks NFTs.

[7] CoinDesk, May 2021. Secret Network Raises $11.5 million.