Incentives Rule Everything Around Me: Multi-Chain Edition

OCT 07, 2021 • 4 Min Read

Ashwath Balakrishnan

Disclosure: Delphi Ventures is invested in ETH, SOL, AVAX, and Off-Chain Labs (Arbitrum). Members of our team also own MIM, SPELL, FTM, AR and ALGO. 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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Market Update

After yesterday’s rally, BTC is having a breather as L1s take center stage again. Apart from L1s, DeFi is surprisingly the only other sector in the green. Top performers over the last 24 hours are FTM, SHIB, AR, and DOT.

Fantom Inflows Blow Up
  • Flows from Ethereum to Fantom averaged $10-25M per day over September. But over the last two days, flows to Fantom increased by an unprecedented amount on the back of a new yield farm.
  • Geist Finance, a fork of Aave, was giving LPs ridiculous incentives. Early farmers 10x-ed their capital in a day — from just providing liquidity. However, as is normal, unsustainable yields drop back down to Earth rapidly. The GEIST token is down 81% in the last 24 hours, falling from $34 to $6.
  • Incentives that sacrifice longevity for short-term hype often don’t fare well. Nevertheless, when yield incentives are as insane as they were on Geist, large capital flows move in quickly to seize the opportunity.

Algorand, Avalanche, and Fantom Are Attracting Capital
  • Algorand, Avalanche, and Fantom have all notably increased TVL over the last 40 days. What’s the common link?
  • Avalanche announced a $180M ecosystem-wide liquidity mining program, and successfully roped in a bunch of yield farmers after that news in August. Algorand announced a $300M fund for various incentives, with close to $200M of that directed towards farming incentives for DeFi projects. This approach proved successful for Polygon earlier this year, using MATIC incentives to attract liquidity on Aave and Sushiswap’s Polygon deployments.

  • Fantom did something similar back in August, except the incentives were for developers and not liquidity. The market didn’t care though. They saw Fantom announce an incentive program and warped into the “bridgoor meme.” It’s worth noting that it was the application-level incentives from Geist, rather than the ecosystem incentives driving the recent growth in Fantom TVL.

Incentivized Chains Lead Bridge TVL
  • The bridges out of Ethereum with the most market share had strong incentives — be it direct or indirect incentives.
  • We’ve already covered Polygon, Avalanche, and Fantom which are the number 1,2, and 4 bridges by market share, respectively. Arbitrum, however, had more indirect incentives from speculative yield farms on the network — pretty similar to Fantom. Optimism took a whitelisted approach to protocol deployments, which meant the high-yield, low sustainability farms never stood a chance of launching there. And the difference in inflows is very, very noticeable.

A New Decentralized Stablecoin?
  • Magic Internet Money, or MIM, is a new stablecoin from Abracadabra Money. The main idea behind the stablecoin was to tap into yield tokens, like Yearn’s yToken, and allow people to borrow stables against them. Yearn alone has over $5B in TVL, which meant there were a lot of idle yield tokens to loan against.
  • MIM is a cross-chain stablecoin with a bridge powered by AnySwap and deployments on multiple chains. Recently, the project conducted an airdrop and yield farm on Arbitrum to reward liquidity providers with their native governance token, SPELL. (For reference, SPELL: MIM is akin to MKR:DAI.)
  • MIM’s trading volume exploded recently, with the vast majority coming from Curve and Sushiswap. Abracadabra offers incentives through Curve: deposit MIM into a Curve metapool, deposit the Curve LP tokens into Abracadabra, and earn SPELL.

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