Highly visionary project, yet not the right time to enter
An analysis on Cult.DAO
(Not financial advice, DYOR, I hold $CULT tokens)
TL;DR
1. Project Overview: The first project to propose a decentralized investment platform and put it into practice, with great vision and strong appeal. The mechanism has an anti-zero setting. The risk is to resist being manipulated. At present, investors are mainly in the short-term speculation mentality. The effectiveness of the project investment will take time to verify. The project is worth holding for a long time or even increasing the position, but currently it is not the right time to enter.
2. Timing of entry: The proportion of project stakers should preferably be higher than 50%; some of the invested projects have begun to generate income; there are not too many malicious or low-quality projects.
Project Analysis
1. Project positioning: decentralized investment platform
2. Project Mechanism
(1) Business model
① Income
1) Daily income: 0.4% of all transactions related to $CULT
2) Investment income: The Cult Protocol obtained the token of the supporting project through investment, which is determined in the form of smart contracts and enters the Protocol treasury through the repurchase of $CULT tokens.
② Expenses: Invest in projects that support decentralization, 13ETH per project
(2) Investment mechanism: Proposals are proposed by the top 50 dCULT “The Guardian” and approved by “The Many”.
(3) Tokenomics
① Maximum supply is 6.66 trillion with current maximum circulation is 4.98 trillion.
② The owner of $CULT can stake the coin which will become $dCULT to get 50% of the project income.
③ Deflationary mechanism: every investment will burn $CULT tokens worthy of 2.5ETH.
3. Project Analysis
(1) Significance: To achieve decentralized investment, allowing the public to gain access to capital
(2) Advantages
① The first project to propose decentralized investment and put it into practice. Strong appealing.
② The project mechanism setting ensures that it will not down to zero. Even if all investment projects go to zero, given the the project’s “heat” , its own transaction fees can still keep the project itself profitable and will not go to zero.
③ In the long run, the project can obtain high-quality projects. The overall design of the project is a long-term idea. In the short term, there will be a phenomenon of bad money chasing good money, but the protocol treasury will have continuous income, hence the project can get the time needed for development. In the long run, high-quality projects will still win.
(3) Risks
① The investment results of collective decision-making are often not easy to bring high returns. The key point of Cult is whether it can effectively invest, but the problem is collective investment, i.e. collective thinking, is often difficult to invest high-yield project. That’s why we always say to invest you must think independently or think against the market.
② The investment mechanism, which is similar to that of angel investment, has a low hit rate. The investment amount is 13ETH per project, which requires massive investment to make a profit. As we know, the hit rate of angel investment is relatively low.
③ The investment mechanism will result in the high cost of investment. Investment proposals often lead to a surge in the value of the underlying project, making the actual investment cost prohibitive. For example, F9 has increased by 5 times since proposing.
(4) Trade Timing
① Currently MC/TVL=0.6, which is not high compared with the top 10 public chains (the numbers of top 10 are generally above 1.2, except for those of Fantom and Waves). Although it is not suitable to benchmark the public chain at the current stage, if we look at it for a long perspective, Cult project has the potential to become a decentralized platform with the nature of a public chain.
② The number and growth of holders: There has been a wave of rapid growth, and the current number of holders is 12,724 (as of 2022–4–10), but the growth has stagnated.
③ Supply and demand (buy/sell): the overall buying is still greater than the selling, indicating that investors are overall supportive.
④ Investor mentality (number of pledged/number of holders): 2049/12724=16% (as of 2022–4–10). It shows that most people are trading with the mentality of short-term investment, long-term investors have not yet accounted for the majority, and the long-term investment mentality has not yet been formed.
⑤ Income situation (the number of projects invested, that is, the expected income in the future, may also return to zero): 10 projects have been invested, with a total of 130 ETH.
(5) Game Theory
① This mechanism is likely to be abused by some projects as a tool for market value management. Having seen that CULT investment has an obvious pull on the token price, some people will buy the top 50 guardian places, propose an investment proposal for targeting project, and then sell the CULT tokens or continue to cooperate with other project parties after the token price is raised. Here is how it works: Guardians can propose an investment proposal, and then vote through multiple wallets or organized small groups to vote for the proposal. If there are several bad investments happen for Cult Protocol, it will affect the reputation of the project.
② On the other hand, the cost of doing evil for guardians will be higher and higher. After submitting bad proposals 3 times, no one will believe them.
Conclusion
This is a highly visionary project, and it is the first one on decentralized investment in Crypto with strong appeal. The mechanism has an anti-zero setting. The risk lies in whether it can resist the abuse of guardians to propose low-quality or even pure fraudulent projects to be invested. At present, investors are mainly in the short-term speculation mentality, and the subsequent new entrants have begun to decrease significantly. The project has begun to accumulate outward investment, but the effect will take time to verify. The project is worth holding for a long time or even increasing the position, but it is not the right time to enter.
Entry timing: The project has undergone a wave of shuffling, and the proportion of stakers should preferably be higher than 50%; some of the invested projects have begun to generate income; there are not too many malicious or low-quality projects.
References
1. Cult.DAO Manifesto:
https://cultdao.io/wp-content/uploads/2022/01/CULT-DAO-Manifesto-1.pdf
2. Free riders, high investment costs: What problems does the conflict between PandaDAO and CULT reveal?
https://mp.weixin.qq.com/s/N9NdLih8AyHngHJ3YJMRRw
2. Guests’ View on Twitter Space : Hundred Times or Zero, Let’s Talk About Game Mechanism Design and Ecological Development of #cult
https://twitter.com/i/spaces/1ypJdElpvmdxW
4. Cult (believer) — a milestone in the encryption circle [Vic TALK Issue 171] https://www.youtube.com/watch?v=0IeytAtzJY0
