The APR Money Printing And TOMB Protocol

Table of Contents

Disclaimer: Crypto is a fast-paced economy and things change quickly. Information on this post might be outdated even if written today. Do your own due diligence and stay safe. I might get affiliate commissions for purchases made through links in this post. Read the disclosure.

Alpha Gained:

The TOMB Innovation

Tomb Finance runs on top of Fantom DAG (Directed Acyclic Graph) chain and applies PoS (Proof of Stake) consensus mechanism to prevent sybil attacks (A sybil attack is an attack, where a malicious actor runs a large number of validators to allow them an unsafe amount of influence over the network). DAG technology allows cryptocurrencies to function similarly to those that utilize blockchain technology without the need for blocks and miners.

Fantom was designed so that every validator is required to own at least 500,000 FTM tokens to become a validator for the chain. This creates the event where it’s very costly to become a validator but also makes the chain pretty secure. There are (at the time of writing) 51 validators for the Fantom chain and most of the FTM tokens in circulation are staked to keep the chain secure and working and the daily rewards for validators are roughly 500k FTM tokens. Fantom chain has a total supply of 3,175B FTM tokens which it will never exceed.

This situation however creates a case where there’s not enough FTM in free circulation for users to be able to use the chain. Thus Tomb Finance innovated a liquid $TOMB token to solve this problem. $TOMB aims to become the primary utility token of the Fantom ecosystem. $TOMB is the first token pegged stablecoin. So instead of being pegged or backed by the USD, it’s pegged to FTM with the three token innovation-combination $TOMB, $TSHARE, and $TBOND.

$TOMB (Cemetery)

TOMB is designed to stay 1:1 with FTM. Meaning 1 $TOMB is always at least worth 1 $FTM. $TOMB keeps the peg via algorithm and should not be confused with crypto-backed tokens, fiat-backed tokens, or traditional stablecoins as $TOMB is not that kind of token. $TOMB has Seigniorage (expansion and contraction of $TOMB supply) and the project is based on Basis, except it’s token pegged rather than pegged to a stablecoin like DAI.

Seigniorage

In traditional economics, the Seigniorage is the difference between the value of the money and the cost of creating that money. If for example dollar has a price of 1, and the cost of producing that one dollar coin is 0.05, then the seigniorage is 0.95.

In the Seigniorage Shares system (in the crypto world), when coin price drops, “shares” are auctioned off for coins, destroying coins in the process. When coin price rises, coins are auctioned off for shares, creating coins in the process.

$TSHARE (Masonry)

$TSHARE kind of represents the users’ trust and $TOMB’s ability to stay in the peg. By getting yourself TOMB-FTM LP token from Spookyswap for example, you are able to stake that LP token for $TSHARE’s. When you stake your $TSHARE’s, you are able to earn $TOMB tokens. When $TOMB is over the peg, meaning that $TOMB is valued more than $FTM, $TSHARE printing is happening 24/7.

$TBOND (Pit)

TOMB Bonds (TBOND) main job is to help incentivize changes in TOMB supply during an epoch contraction period. When the TWAP (Time Weighted Average Price) of TOMB falls below 1 FTM,  TBONDs are issued and can be bought with TOMB at the current price. Exchanging TOMB for TBOND burns TOMB tokens, taking them out of circulation (deflation) and helping to get the price back up to 1 FTM.

These TBOND can be redeemed for TOMB when the price is above peg in the future, plus an extra incentive for the longer they are held above peg. This amounts to inflation and sell pressure for TOMB when it is above peg, helping to push it back toward 1 FTM.

The Pit opens only when the $TOMB’s peg or (TWAP) is under 1. As long as it’s above peg, the printer keeps printing $TOMB to make it go 1:1 with FTM.

Printer Mechanics

The_TOMB_Investing_APR_Money_Printing
The TOMB APR money printing mechanics

The money printer keeps printing $TOMB as long as the peg is above 1.01 against FTM inside the Masonry. If TOMB is 1.02 for example, the TSHARE printer keeps printing TOMB to make more and more supply so that the peg would go closer and closer to 1.01 with FTM. However, when we think about Cemetery, that machine keeps printing TSHARE 24/7 regardless of the peg, and that’s because it’s printing TSHARE and not TOMB.

In a sense, the TSHARE’s price doesn’t matter, because you can always create TSHARE-FTM LP token and stake that LP token to the Masonry to earn $TOMB which tries to stay above peg and that is what is meaningful here. So all in all, the printer keeps on printing, if you are bullish on FTM as an ecosystem. You also have to remember that FTM tokens value is ever-changing creating the TOMB printer to print that token endlessly if TOMB keeps above peg.

The Design

The “flaw” in $TOMB’s design is that the Fantom chain works with FTM, the validator rewards are paid in FTM (rewards distribution is fully controlled by an SFC contract. The SFC contract can be upgraded by governance at any time without hardfork), and transactions are paid in FTM. Making the $TOMB project questionable. Though as mentioned before, it can be found that in Fantom’s documentation, it is stated that a hardfork (copy of the original Fantom chain for further chain upgrades) is not needed, and thus it could be that the chain could be upgraded to use $TOMB as its main liquid currency, medium of exchange. If TOMB replaces FTM, then what is the use case for FTM and does it have any utility anymore? And if FTM is replaced more than likely the FTM’s price drops, bringing down TOMB and the whole FTM ecosystem?

The Tomb Finance is DAO and can be funded by staking your FTM to Node 82. 

APR vs. APY Difference In Crypto

APY means Annual Percentage Yield, whereas APR means Annual Percentage Rate. APR is a simple interest rate, so your profit is always tied to the initial investment. In APY’s case, your initial investment grows through compounding, so it isn’t fixed to the initial investment but to an ever-growing investment. So you are getting interest on top of interest. So a simplification would be that APR is not compounding interest and APY is.

APR (Annual Percentage Rate) Example In Crypto

how_APR_works_in_crypto
APR calculation example for cryptocurrencies

Initial Investment: $1,000
APR (daily): 20%
Profit: $200/day

APY (Annual Percentage Yield) Example In Crypto

how_APY_works_in_crypto
How APY works in crypto

Initial Investment: $1,000
APY (yearly): 20%
Profit: $221.34/year

The AVAX Printer Fork(s)

With the massive success of  Tomb Finance on the Fantom ecosystem, it was only a matter of time, before a TOMB fork was created. TOMB had a use case behind its birth. TOMB wants to be the medium of exchange in Fantom. That is however not the need in the Avalanche chain. Avalanche chain at its current state does not need a new medium of exchange. It does not need $KITTY or $PIGGY or ten other $TOMB forks.

However, Kitty and Piggy Finance’s purpose is not to create a new medium of exchange, they are out there just to print money. Their documentation states nothing like TOMB’s, and the documentation is pretty much a carbon copy of TOMB’s documentation, and there’s nothing wrong with that. It’s just something to note and think about when investing in forks. Do they have a use case and does it make sense, but all in all, TOMB forks are pure money printers and in that itself, there’s nothing inherently wrong with that.

The core mechanics are the same and the printing operation is the same, and when you think about getting a solid 10-20% APR/day, it’s not hard to get into these projects. And it pays to be early, as the more TVL there is, the smaller APR you will get, but at the same time, the more valuable APR you will get.

Insane Level APY Money Printer

DIBS Money investing model (image source)

APR is about getting interest against your original investment, APY is about getting interest on interest. When thinking about getting a 20%/day APY, things get very interesting. Though at the same time the risk curve grows exponentially, we are in crypto and the risk tolerance is already pretty darn high, so take that into account.

There’s a yield farm called YieldWolf and it offers the same LP’s (liquidity pools) as $PIGGY or $KITTY but instead of staking your LP tokens to Piggy or Kitty Finance sites, you can stake the same LP tokens to Yield Wolf and start earning massive 20%/day (at the time of writing) yield. That’s roughly >10,000T%/year! Making the yield better than in the latest high APY projects that offer billions of percentages per year.

yieldwolf_finance_earning_example
YieldWolf finance investing model and an example

With the YieldWolf you are not printing PSHARE’s or CAT’s, but the actual LP tokens. So the earning mechanism is very different but insanely lucrative, though the risk is as high as it can get, even though the project has been audited. What must also be realized is that while you do earn LP tokens, you also earn at the same time a pair of tokens. For example, if you are earning PIGGY-AVAX LP tokens, it also means you are earning PIGGY and AVAX tokens. And when you realize that you are earning AVAX tokens by 20%/day, the game changes.

Social_Media_AVATAR_2022_v2
Written By Juha Ekman

Table Of Contents

Services Used

More Alpha...