ENS Soars, Whirlpool Farms, & Valuing L1s

APR 27, 2022 • 5 Min Read

Joo Kian + 2 others

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN YGG, ETH, AND SOL. MEMBERS OF OUR TEAM ALSO HOLD ENS AND ARE PARTICIPATING IN THE FARMS ABOVE. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Chart of The Day: ENS Reignites Growth

  • Ethereum Name Service (ENS) is a protocol for decentralized domain names on Ethereum. Users typically have an ENS for human-readable crypto addresses that is usually a set of random alphanumeric characters. Every ENS address is unique and there are no duplicates.
  • Over the past few days, ENS registrations soared to a yearly high of 10k daily registrations. This comes as users start to sweep ENS addresses of numerical digits under 10,000, behind a theory that users of popular NFTs like BAYC might want to own an ENS number of their NFTs. As one anon mentioned: “There are multiple PFP projects with 10k NFTs, but there are only ever going to be 10,000 ENS addresses under 10,000.”
  • This generated revenues of $1.1m in daily revenue on April 26th as ENS registrations soar. Each ENS address typically costs $5 for a year (ex. transaction fee) and increases as your registration duration becomes longer. This will likely not last for long and normalize once-popular names are minted.
  • For more on ENS, Delphi members can see our Delphi Pro report here.

Airdrops, Concentrated Liquidity on Solana, Leveraged ETH Staking & Stablecoin Pools

[Excerpt from Apr. 26th Yield Insights]

  • Orca’s Whirpools are its next-generation AMM. Using the power of concentrated liquidity, Whirlpools provides higher yields for liquidity providers and better rates for all. Whirlpool solves issues of high slippage and unused capital limit yields for liquidity providers by allowing liquidity providers to concentrate their liquidity in specific price ranges. Liquidity providers who provide deeper liquidity for the range in which trades actually occur will earn a higher share of fees and rewards, encouraging more efficient use of capital. Learn more about it here.
  • Yield Calculations can be found here. To access Orca, you’ll need to connect to a Solana-compatible wallet.
  • Bridge: You can deposit and withdraw assets onto the Solana using the Wormhole Portal.
  • Tokenomics:
    • Total Supply: 100M
    • 66.1% (66.1M ORCA) is reserved for the community.
      • Emission rates are adjusted on a biweekly or event basis. The initial emissions across all Orca farms were approximately 200k tokens weekly and have reduced since.

  • Notable Unlocks:
    • 20% (20M ORCA) will be unlocked over a three-year vesting period and one-year cliff by the team.
    • 13% (13M ORCA) will be unlocked over a three-year vesting period and a one-year cliff for Fundraising.
    • 0.9% (900k ORCA) will be unlocked over a three-year vesting period and one-year cliff by Advisors.
  • Rewards: check the exposure summary below to see reward distribution and breakdown
  • Whirpool Rotation #1
    • Duration: Monday April 25th to Thursday May 5th
    • Rewards: The rewards are detailed below for each Whirlpool. Pools will open for deposits on April 25 and rewards will begin on April 26 at 12:00 UTC
  • Note: Whirlpools will continue to take zero fees for the Orca Treasury. This will further increase yields for LPs and lower prices for traders.
  • For more, Delphi members can see the latest Yield Insights here.

Valuing Layer 1s – Memes, Money, or More?

[Excerpt from a Delphi Pro Report]

  • Fees accrue to stakers or burn (benefitting all holders). They directly improve overall tokenomics in either case.
  • Reduced to a formula, Net Token Value Capture = (% staked x real staking yield) – (% unstaked x inflation rate).
  • In other words, nominal yields are headline rates, and real yields are net of inflation accounting for tokens burned. This formula then captures the weighted average real yield across all token holders accounting for stakers and non-stakers. The first half weights the real yield of stakers. The second half weights the real yield of holders not staking (i.e., they lose inflation or gain deflation).
  • Real staking yields capture fees and MEV accruing to validators (only in proof of stake), as well as token burning which also benefits all holders (beneficial in both PoS and PoW).
  • Note: this doesn’t penalize high PoS inflation as is often done with simpler value capture models such as fees minus issuance. Inflationary block rewards that stay in protocol are just shifting value from holders to stakers. A higher inflation rate changes my individual opportunity cost and decision of whether or not to stake. However, it doesn’t actually say anything about value capture for the overall token itself. You’re just dialing the needle of whether to benefit stakers or other holders. It’s net neutral to value capture either way, you’re just deciding who it helps.
  • This is analogous to the decision of whether to burn fees or give them to validators. In this situation value is captured either way, you’re just deciding who it helps.
  • If you’re buying a token for a long-term investment, you will logically intend to stake it and value it as such. So a higher block reward should not directly hurt any valuation methodology. The maturation of liquid staking derivatives will also make staking even more ubiquitous. Most L1s already have the significant majority of their supply staked (ETH is currently the outlier for obvious reasons), and this should increase over time. As a thought experiment, if 100% of a token is staked, I don’t really care if the inflation rate is 5% or 10%. It’s all just moving value around and I’m breaking even.
  • For more, Delphi members can read the full post here.

 

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Joo Kian + 2 others