By Afsar Akal
Long before biology, genetics and life-sciences became scholastic disciplines, tribal societies have figured out that incest relationships and close kin breeding turned out to be a negative sum game as far as survival of human species is concerned. It caused birth defects, congenital diseases, lifelong disabilities, and reduced life expectancy. How come modern society like ours would fall into this trap at this level of scientific advancement?
The gene pool of Waves ecosystem is polluted with a lot of inter-breeding defects. There are way too many platforms that perform similar functions. It is sometimes hard to understand why there is SWOP Finance when there is already a native DEX platform. O.K. so Puzzle is kind of like Balancer for mostly GameFi and low liquidity projects but is it really needed? What about Tsunami exchange and or Tidex Exchange which presumably offers fiat ramps but net net, all that goes on within Waves ecosystem is a lot of interbreeding activity. You may hear a tweet like Enno or EGG Liquidity pool incentives paid in WX tokens for yield farming which sounds like something new, although for a long time WX/USDN, USDT/USDN, USDC/USDN pools distributed plenty of WX tokens to liquidity providers. Aren’t the users eventually going to cash out their WX incentive tokens to USDN and then to USDT/C?
When you look at base APY and Reward APY split of a typical WX pool, you may quickly spot the imbalance. Base APY comes from trading activity, a real economic return yet reward APY is printed money out of thin air. Yes, other protocols have tried “yield farming” too. But why insist on something that has already failed?
Let’s now look into how recapitalization by mingling with cross blockchain platforms and distributed applications could help existing USDN holders who are trapped in Vires Finance. Suppose that you have legacy USDN converted from USDT/USDC deposits you have made earlier that was coerced by Private Ivanov. You can’t withdraw your principal due to adaptive limits and bot activity, but you’re allowed to claim your interest rewards which yields around 2–3%.
Let’s now put a new method to recapitalize the protocol by injecting BTC and ETH but rather than entrusting them to Vires smart contracts, we choose AAVE’s Polygon Network. The multi-sig wallet that controls this account will still be managed by the Vires Finance team, yet the information will be public and what gets done with these funds will be transparently shared on an alternative network.
It is worth noting that transparency in Waves is already impaired. For instance, the Investment products usually display historical records of just the past year and even that is inconsistent. USDT Lambo product seems to show data since fund’s inception (12 Apr 2020), whereas USDC shows only the last year although it has been operational for almost 2 years.
The APY on these two indicates up to 64% returns yet doing a simple math yields USDT return of about 35% since inception and for the past year, about 41.9%. These are good returns, but they are nowhere near 64%. Theoretically the statement of ~63.70% is not wrong but misleading. More importantly, Vires Finance recently disabled public access to ‘Account Statement’ display function for users to transparently see the status of any account especially the large ones. This link that used to show assumed bad debt of an account controlled by Private Sasha Ivanov for instance has been disabled. The following snapshot which presumably belonged to an account controlled by Alameda Research looked as follows.
What are we hiding really? But let’s get back to the more important question. What type of investment strategies these complex investment products like Lambo use. From the information provided by Waves Exchange blogs, we understand “These funds are used by trading bots on several cryptocurrency exchanges.” Well that is not interbreeding which may sound O.K. but that is certainly a CEXual activity which in its own right a practice that Waves ecosystem should avoid after all that happened with FTX and other centralized protocols. This is why we propose intermingling with other decentralized platforms like AAVE and UniSwap and bring in real yields to pay off USDN debt.
aCEXual Healing
The healing process for the Vires Finance bad debt situation and USDN depeg will take time for sure. One thing is certain though; we need a-CEXual methods like DEXual or non-Waves DeFitual if a new vocabulary helps. Late Marvin Gaye would have written proper lyrics had he lived to see the day.
We have discussed real yield methods in the previous blogposts so let’s revisit and summarize them all.
· Tap on existing Vires Finance users to recapitalize all of the Waves DeFi protocols.
· Use hard currencies like BTC, ETH, USDT and USDC to increase the gold and silver content of Neutrino treasury and increase the Backing Ratio.
· Give the option of a higher interest for all Vires Finance deposits denominated in BTC, ETH etc. when interest is paid in USDN rather than in native form. This is a new use case and would create additional demand to shore up support for otherwise ailing stable coin.
· Intermingle with non-Waves DeFi protocols such as AAVE and UniSwap to produce real yields and use these returns to pay of Vires Finance bad debt.
· Abstain from CEXual activity for generating trade income.
In the next blog post, we will discuss how the upcoming PowerDAO could be used to manage funds through governance.
