A few protocols that share the wealth

July 10, 2022July 12, 2022 Stan

We’re still seeing the domino effects of Three Arrows Capital. It’s going to take a few months at least until we see the full effects play out.

Meanwhile, it does feel like SBF (of FTX) and CZ (of Binance) are in a Godzilla vs Kong scenario for total dominance of the crypto space.

We’re the humans on the sidelines hoping we don’t get trampled over.

Here’s what I’m talking about today:
• Real revenue. Which protocols actually make money?
• Arbitrum got pricey. Gas on an L2 became more expensive than ETH.

Let’s dive in!

💸 Protocols with Real Revenue

Do you remember the protocols that offered 200%+ APY for yield farming?

Well, the problem is those “native” tokens are printed aka token emissions. I’m not saying that all token emissions are bad. It’s a way for protocols to bootstrap liquidity and attract users.

What happens when there’s a bear market (like right now?). People start dumping those tokens. The 200% APY isn’t as great if the emission token is down by 90%.

So now people are looking for protocols which are more sustainable.

What people want:

• Protocols that have found product / market fit
• Generating positive cashflow
• They have a tokenomics model that shares the protocol revenue with token holders.
• The revenue is paid in sound money such as ETH and Stablecoins.

Wouldn’t you rather get paid in Stablecoins or ETH over inflationary Burrito Tokens?

Here are a few projects that fit these criteria:

1. Trader Joe on AVAX.

What: The top decentralized exchange on Avalanche. The protocol generates fees from every swap.
Revenue over 30 days: $4.15m
How: You stake sJoe and they pay you USDC

2. GMX on Arbitrum and AVAX
What: Decentralized Perpetual Exchange aka trade with leverage.
Revenue over 30 days: $3.97m
How: Staking GMX earns you 30% of fees from swaps & leverage trading. You get paid via ETH or AVAX depending on which network you’re using.

3. Umami on Arbitrum.
What: It currently generates revenue from its treasury yield. They are set to release their first UDSC vault protocol which will generate product revenue.
Revenue over 30 Days: They did $78k in June. A detailed dashboard is going live in July.
How: Stake your UMAMI for mUMAMI via marinate. Rewards are paid in wETH. (Can only withdraw on the 1st of each month). You can compound your wETH rewards via Compound.

There are many more out there. You can start by checking out TokenTerminal and seeing which protocols generate revenue. Then research their tokenomics to see if and how they share the revenue.

The main risk of these protocols: bear markets = lower protocol usage = lower fees.

You can expect that in the next cycle, everyone will be more demanding of real world usage and protocol revenue.

By the way, these aren’t recommendations to purchase – this is me keeping you up to date with the latest trends.

With the macro environment the way it is, stick to BTC / ETH / Stablecoins / and Bluechips.

📰 The Fast Five

1. The 3AC Dominos Keep Falling. The Monetary Authority of Singapore is investigating 3AC for providing false information. A court in the British Virgin Islands has ordered its liquidation. The funds will have its assets distributed by Teneo, a NY based consulting firm. Kyber network has confessed that a portion of their treasury was managed by 3ac. (It’s speculated to be around $7.9m)

2020: DeFi Summer
2021: Solana Summer
2022: Contagion Summer

2. OpenSea Data Breach. They used a service called Customer.io to send emails. Well, an employee of Customer.io downloaded, and sold their email database of users.

Here’s why that’s bad: The bad actors have your email, and may send you an email pretending to be from OpenSea. They could lead you to a site that’s trying to steal your Crypto.

Always be careful of emails from companies. Ledger hardware wallet’s customer database got hacked a few years ago. Set a rule to never open files in emails, and always verify if the email sender address isn’t being spoofed.

3. A Layer-2, Arbitrum, became more expensive than Ethereum temporarily. The whole value proposition of Layer 2s is they’re supposed to be cheaper. They launched an 8 week program called Odyssey that would reward users with NFT’s.

Well, the transaction load was too high and gas fees spiked. They’ve paused the Odyssey program. There’s going to be an upgrade on Arbitrum called Nitro which should increase the experience.

The past few weeks have been bad for Ethereum L2s. DYDX moving to Cosmos, and Arbitrum pausing Odyssey. Growing pains – L2s on ETH will be fine in the long run.

4. Bancor’s in Trouble. I don’t even know where to begin with this. Their biggest value proposition was Impermanence Loss protection. They paused it. More victims of the Celsius / 3AC fallout. Read more.

I don’t see how Bancor’s going to recover from this. It’s like going to Burger King and finding out they’re pausing all burger sales. The trust is gone.

5. Solana is working on a Mobile phone. They’re releasing an Android phone call SAGA and a softwarekit called Solana Mobile Stack. Their goal is to improve Web 3 access and functionality on a phone. Read more.

Alright, I know it’s easy to dunk on Solana. It’s no secret that Solana has had its troubles lately with network outages. I love this idea. These are the kind of swings that industry needs to take to increase real world adoption. I’m not sure if I’d get one personally, I’m too attached to my iPhone.