Pyrotokens are for all the HODLers out there
Here’s why (and how to get them)
Quick Terminology help:
Redeem rate is the rate at which a wrapped token can be converted to its underlying token. For instance, wrapped ether (wEth) has a permanent redeem rate of 1:1. Compound’s cDai has a redeem rate that is constantly growing so that over time cDai can be redeemed for more Dai.
Burn refers to when a quantity of a token is deleted from supply. For instance, if the total supply of TokenX is 100 and you burn 10 then the total supply will fall to 90.
The power of burning
In 2019, WeiDai was launched to demonstrate the power of burning as a means of transferring wealth to HODLers (savers). In the universe of DeFi, Dai wrappers tend to universally be based on debt markets. Tokens like cDai, Chai and rDai are wonderful savings tokens but a token based on interest transferred from borrowers to savers has an upper limit. You can only charge a borrower so much interest before they refuse to borrow. If Compound charges 10% per annum then cDai can pay appreciate at most by 10% but probably less. By contrast, since November 2019, the WeiDai redeem rate has grown by 32% through burning alone!
Burn burn burn!
WeiDai has a number of inbuilt burn incentives but one of the early promises at launch was that dapps would be rolled out which would burn WeiDai as a matter of course. Yesterday that promise was fulfilled with the launch of Behodler, a token swapper that burns a small WeiDai fee every time it is swapped for another token. Random price drift and arbitrage seekers will ensure that WeiDai receives constant burning going forward. The wonderful thing about burn powered tokens is that the more burn dapps you add to the mix, the more burning there’ll be.
Enter Pyrotokens
Inspired by WeiDai, each token on Behodler has its own version of WeiDai, a wrapper that has a redeem rate which is increased through burning. Each of these wrappers is prefixed with ‘Pyro’. So LOOM has PyroLOOM, LINK has PyroLINK, WBTC has PyroWBTC etc. They all launched with a redeem rate of 0.01 which means 1 PyroLoom can be redeemed for 0.01 Loom. Every time you swap a token on Behodler, a fee of 2.4% is levied. The fee is then wrapped into a Pyrotoken. Half of that Pyrotoken quantity is burnt and the rest is sent to you, the trader. The burning pushes up the redeem rate in the process. Let’s see how this works.
Numeric example of how Pyrotokens work
Suppose you want to swap BAT for ETH. Let’s assume that there is 0 PyroBAT in existence. The default redeem rate for PyroBAT is 0.01. You swap 100 BAT on Behodler and a 2.4% fee is levied or 2.4 BAT. It’s immediately wrapped into PyroBAT so that 240 PyroBAT is created with a reserve of 2.4 BAT. This means the redeem rate is still 2.4/240 = 0.01. Now, Behodler burns half of that. So it burns 120 PyroBAT. This means the redeem rate is now 2.4/120 = 0.02. The remaining PyroBAT (120) is sent to you as a reward.
Now somebody else comes after you and wants to swap 60 BAT for LINK. As before, 2.4% is set aside for wrapping. So 2.4% of 60 is 1.44 BAT. At a redeem rate of 0.02, the 1.44 BAT becomes 72 PyroBAT. Now the total supply of PyroBAT is 120 (yours) + 72 = 192. The total reserve is 2.4 + 1.44 = 3.84. The redeem rate is 3.84/192 = 0.02, as before the trade. But Behodler still burns half of the fee. So 36 PyroBAT is burnt and the remainder is sent to the new trader. The new redeem rate is now 3.84/(192–36) = 0.024615385.
You currently hold 120 PyroBAT as per your original trade. When you received it, it was worth 2.4 BAT. After the newcomer trades, your PyroBAT is now worth 120*0.24615385 = 2.9538462 BAT. Your PyroBAT holding has grown in value by 23%. Behodler fees increase the value of all existing Pyrotoken holders.
HODL
As you can see from the previous example, if you hold Pyrotokens, regular trading by other people will increase the value of your holdings. The redeem rate will rise but it can never fall! So at the very worst, your Pyrotokens maintain parity with their underlying token but they stand a chance to gain in value quite considerably.
Why hold ETH when you can hold PyroWeth? Why hold WBTC when you can hold pyroWBTC. Why hold Dai when you can hold WeiDai?
How do I get Pyrotokens?
Head over to the WeiDai dapp, connect your metamask wallet and click on Swap Tokens as per the image below:
You’ll be taken to the Behodler token swapper.
Select the input token you’d like to get Pyrotokens for. Please note that there are 3 exceptions:
Scarcity doesn’t have PyroScarcity because its the liquidity token of Behodler. Dai’s Pyrotoken is WeiDai. When Dai or WeiDai are swapped, the entire fee is converted to WeiDai and burnt. If you’d like to get hold of WeiDai, click on the Create / Claim menu option.
Once you’ve chosen a desired input token and a desired output token, select and amount and click the SWAP button.
Once you’ve confirmed the transaction in metamask, click on the PyroToken tab above the input text box:
Now you’re on the Pyrotoken redeem page. If you wish to redeem your Pyrotoken holdings for their corresponding base tokens, select the correct Pyrotoken from the drop down and enter the amount.
As you can see, the redeem rate for PNK is 0.0575. which means 1 PyroKleros will give you 0.0575 PNK. As a side note, this screen shot is from mainnet and the redeem rate was initially 0.01. The current rate of 0.0575 was achieved with just a week of transaction volume.
Good luck, have fun and remember to burn and HODL!
Final disclaimers:
As the banner above indicated, Behodler is in beta and should be treated with caution. Please don’t sink your life fortunes into it. Testing has been thorough, all of the known security risks on Ethereum have been accounted for and audited libraries have been used in place of wheel reinvention. But still take caution.
If you’re in a jurisdiction where using Behodler or WeiDai is legally grey, please consult a legal professional first.
No promises of profit are made. The value of the base tokens can fall so that even if the redeem rate of a pyrotoken grows, the value expressed in a national currency like the dollar may still fall.
