pHBD brought about a radical shift in the platform dynamics of PolyCUB. We envisioned the launch of pHBD adding a lot of value to PolyCUB, but we had no idea just how much value it would bring.
Just a few days after the launch of pHBD, we realized that a step function change in the PolyCUB platform was necessary. We saw that pHBD was generating thousands of dollars in revenue for the PolyCUB Protocol every single month and was far outpacing the value accrual of Kingdoms.
Armed with this data, we set out on a mission to launch pHIVE and pSPS. Now, we've got 3 of these 2nd generation vaults that generate 5 methods of value accrual for the PolyCUB Protocol.
These new vaults have completely changed the dynamics of the platform. Since they launched, we've now seen POLYCUB reach all-time highs in terms of stability and low price volatility.
It's incredible to see this in action. The Governance backend is also now deployed and PolyCUB DAO has been running in the background for a few weeks.
With the Governance UI on the way and vexPOLYCUB about to launch alongside it, we're seeing a massive expansion in the utility of owning POLYCUB tokens.
The Vision: Safe, Reliable and Growing Yield
The vision of POLYCUB is to build a platform where everyone on LeoFinance and beyond can earn safe, reliable and growing yield.
The new direction of POLYCUB is one that looks somewhat like Thorchain in a way - the new V2 vaults are all paired with POLYCUB.
This makes POLYCUB the base settlement asset of the PolyCUB Economy. By doing this, all arbitrage, all trading volume, all LPs run through the POLYCUB token.
The value this generates is immense. When 1 trade occurs on POLYCUB-USDC, an arbitrage trade immediately happens on POLYCUB-WETH, POLYCUB-pHIVE, POLYCUB-pSPS to even out the prices and arb them back to equilibrium.
As an LP, this means that you're soaking up trading fees earned from all this arbitrage in addition to the inflationary APR paid by the PolyCUB Protocol.
Our vision of creating safe, reliable and growing yield has become clear. By building these V2 vaults and getting liquidity added to them, we're seeing increased rates of arbitrage, trading volume, APY for LPs, etc. that are outside of normal inflationary measures.
Combine these factors with the Multi-Token Bridge - where the POLYCUB Protocol owns the oracle bridges - and all of the value accrual that it brings through wrapping fees, internal arbitrage and oracle staking (staking HBD on-chain, HIVE on-chain and SPS on Splinterlands).
Halvenings and Value Accrual
24 hours ago, the POLYCUB halvening took place. This dropped the # of POLYCUB tokens released per block from 0.5 to 0.25.
Now, there are roughly 10,500 POLYCUB created per day. At current prices, that is just $1,600 per day that is added to the supply of POLYCUB.
When you also adjust for the 30 day claiming period, the amount of POLYCUB that can potentially hit the market is extremely low and spread out.
Value Accrual, Scarcity and Utility
PolyCUB V2 vaults combined with the multi-token bridge generate tens of thousands of dollars in monthly value through the 5 methods of value accrual:
- insert_hive_asset (i.e. pHIVE or pSPS, etc.) - held as 1:1 collateral for the wrapped equivalent - staked on native platform (i.e. HIVE POWER or SPS staking on splinterlands.com) = value accrual for PolyCUB's PoL
- insert_hive_asset 0.25% wrap and unwrap fee = value accrual for PolyCUB's PoL
- insert_hive_asset cross-chain arbitrage = value accrual for PolyCUB's PoL
- insert_hive_asset-POLYCUB = utility for people to buy POLYCUB to LP against - their insert_hive_asset = value accrual for PolyCUB's PoL
- insert_hive_asset-POLYCUB holders need to buy more POLYCUB to stake as xPOLYCUB to control governance and drive insert_hive_asset-POLYCUB vault yield higher
Combine this value accrual with the scarcity of the POLYCUB supply and you can see that the flippening is upon us. With only $1600 per day created to incentivize LPs, the Multi-Token Bridge, Kingdoms Revenue and Protocol Owned Liquidity now all work together in an attempt to generate more value than is created through inflation.
In next month's halvening, we expect to see the flippening occur: where more value is generated by the PolyCUB Protocol than is actually paid out to LPs.
The result? POLYCUB's price must increase in order to bring this ratio back to equilibrium.
Equilibrium
As POLYCUB's price increases, we see the LP APYs increase as well - since the APY is determined by the value of the POLYCUB being paid out to the vaults.
As APYs increase, we'll also see more LPs add assets to the pools, increasing the total liquidity of POLYCUB.
As of 6/20/22, the total liquidity of POLYCUB-paired vaults is $414,000 USD while the total market cap of POLYCUB is $950,000. That's ~43% liquidity / market cap ratio which is healthy. Our goal is to increase this ratio which means creating a highly liquid marketplace to buy and sell POLYCUB.
There is some interesting game theory to be played out as the APYs fluctuate, Governance drives yields to different vaults, the Protocol buys POLYCUB on the market and the price dynamics shift.
If the price of POLYCUB decreases, the Protocol's issuance of POLYCUB per day becomes lower than the $$ that are generated by the Multi-Token Bridge, Kingdoms Vaults and Protocol Owned Liquidity. This causes the price of POLYCUB to go back up.
If the price of POLYCUB increases, the Protocol's issuance of POLYCUB per day becomes more than the $$ that are generated by the Multi-Token Bridge, Kingdoms Vaults and Protocol Owned Liquidity. This causes the price of POLYCUB to go back down to equilibrium.
Obviously, these are just the hardline fundamental mechanics. You never know what speculation can add to this mixup. That's where studies of protocols like Thorchain can come in handy - where there's a speculative multiplier that is almost always 3x the deterministic value.
Utility
This post has talked at length about fundamental valuation and putting hardline metrics to the price of POLYCUB. What about speculation? What about Utility? What about reasons to hold and own POLYCUB?
The Governance backend is live and we've successfully tested the rollout of the PolyCUB DAO.
Only about 20% of users have actually participated in the xPOLYCUB Yield Governance voting.
Many have said this is because the UI isn't live yet, so users aren't incentivized enough to go through the hassle of sending transactions manually to participate in Governance.
Governance is the ultimate utility for POLYCUB. It generates so much value to anyone who holds POLYCUB and LPs assets on the platform.
Wen we deploy the Governance UI, we expect the # of users who participate in the weekly Yield Governance votes to radically increase above that 20% participation rate.
What happens when all of this goes down? We'll have to wait and see.
Vision, Fulfilled
The goal of POLYCUB is to create safe, reliable and growing yield. Our interest is in creating a platform where anyone on LeoFinance and beyond can feel comfortable LP'ing assets and earning yield in a sustainable way. Few platforms have achieved this but even fewer platforms have gone through the steps we've undertaken to build platform mechanics that are all aimed at radical value accrual.
Many have talked about the price of POLYCUB 10x'ing to $1.50 and beyond from the bottom-of-the-barrel valuation that it is at right now. This is not just likely, this is determined. The fundamental value accrual metrics combined with the radical reduction in supply dynamics combined with Utility to own POLYCUB to participate in Governance and control the Yield Dynamics of the Liquidity Pool Vaults is all it takes.
... and we haven't even talked about vexPOLYCUB and Collateralized Lending yet.
About LeoFinance
LeoFinance is a blockchain-based Web3 community that builds innovative applications on the Hive, BSC, ETH and Polygon blockchains. Our flagship application: LeoFinance.io allows users and creators to engage and share content on the blockchain while earning cryptocurrency rewards.
Our mission is to put Web3 in the palm of your hands.
Twitter: https://twitter.com/FinanceLeo
Discord: https://discord.gg/E4jePHe
Whitepaper: https://whitepaper.leofinance.io
Our Hive Applications
Join Web3: https://leofinance.io/
LeoMobile (IOS): https://testflight.apple.com/join/cskYPK1a
LeoMobile (Android): https://play.google.com/store/apps/details?id=io.leofi.mobile
Delegate HIVE POWER: Earn 16% APR, Paid Daily. Currently @ 2.8M HP
Hivestats: https://hivestats.io
LeoDex: https://leodex.io
LeoFi: https://leofi.io
Polygon HBD (pHBD): https://wleo.io/hbd
Polygon HIVE (pHIVE): https://wleo.io/hive
Web3 & DeFi
Web3 is about more than social media. It encompasses a personal revolution in financial awareness and data ownership. We've merged the two with our Social Apps and our DeFi Apps:
CubFinance (BSC): https://cubdefi.com
PolyCUB (Polygon): https://polycub.com
LEO Wrapping Bridge: https://wleo.io