Bonds Profitability Update
Since then we have seen our protocol-owned liquidity grow rapidly to over $600,000. In a short space of time this has meant fulfilling our objectives of creating deeper lasting liquidity, removing on-going selling pressure from LP farms, introducing further MOR into circulation, and thereby expanding fee revenues. This has been extremely positive for Growth DeFi.
However, at the same time we acknowledge the obvious decline in WHEAT and GRO token prices that have coincided with these bonds being listed. Token holders could understandably not be clear on how bonds have actually strengthened the fundamental financial outlook for WHEAT and GRO.
Therefore, in this article we want to explain how much value has actually been created through bonds to date - and what this means for GRO and WHEAT both currently and looking forward. We hope this update provides greater transparency - based on the financial metrics - so people can see how WHEAT and GRO, and token holders, are actually benefiting.
How Much Value Has Been Accrued to WHEAT?
In early December two bond pools were launched — WHEAT/MOR and MOR/AVAX — that offer WHEAT in exchange for users providing permanent liquidity. Since launch, we have already seen $442,000 added to WHEAT protocol-owned liquidity (POL) from these bonds. At the time of writing:
- WHEAT/MOR has generated $287,898 worth of permanent liquidity
- MOR/AVAX has generated $154,111 worth of permanent liquidity
This $442,000 of liquidity is currently earning an estimated annualized revenue of $240,000 between swap fees and revenue share for MOR. This equates to about 54% of its POL.
How Much Value Has Been Accrued to GRO?
Similar to WHEAT, there has been a bond pool for acquiring GRO/MOR liquidity. Since launch, $230,000 in permanent protocol-owned liquidity has already now been acquired through this bond — in a little over two weeks! In terms of how much annualized profits this adds to GRO, it comes out to around $80,000 of revenue, or about 34% of its POL. Note that this figure also factors in about $15,000 from MOR revenue sharing (13%) thanks to having ~$115,000 MOR being in circulation that were minted for bonds.
What Does This Mean for MOR?
Between all the LP tokens acquired through bonds an extra 386,000 MOR has been added into circulation. Based on the historical profitability of MOR, this represents an annualized increase in ecosystem profits of 78,000 MOR just from adding this initial amount into circulation since the launch of bonds!
Now imagine what this means for creating ecosystem profits going forward, with bonds on Avalanche, BSC, Fantom, and additional chains…
Clarifying Common Misconceptions
We have seen some general confusion and misconceptions about the impact of bonds so here are some key points:
- Instead of continuing with the previous model of incentivizing LPs (‘renting liquidity’) and subsidizing multiple vaults, these emissions now go towards bonds which acquire permanent liquidity and allow us to further bootstrap different Exponential Buyback Collectors (EBCs) to add value and buyback power to WHEAT (gOHM/AVAX and aTriCrypto are two good examples).
- Bond discounts exist due to the period of vesting required and not being able to earn staking rewards on the tokens that are still vesting. We are now working on possibilities to better optimize discounts for the protocol’s benefit.
- Even though bond emissions are part of our growth strategy it is important to remember that all tokens and positions already acquired through bonds are now owned by the protocol. This is huge, because it allows the protocol to reallocate its bond emissions to accumulate strategic assets and adjust the strategy depending on where growth is needed the most.
The purpose of bonds has always been to create capital efficiency. Under the previous system (liquidity mining for LPs) Growth DeFi was giving out WHEAT in exchange for renting liquidity. The effect on WHEAT’s token price was detrimental, as LPs simply sold WHEAT continuously into the market. As a consequence we moved completely away from this setup as soon as Olympus Pro launched on Avalanche.
WHEAT that now goes towards funding bonds would have otherwise ended up going to liquidity miners — but now it is owned by the protocol. Token price pressure may have been the same, but the protocol would own no assets. Instead token holders now own their share in a rapidly growing treasury of permanently-owned liquidity, and Growth DeFi is on a pathway to becoming one of the most capital efficient DAOs.
Additional Bonds Launched!
We are pleased to advise that two additional bonds were launched on Avalanche through Olympus Pro on 17 December. These are WHEAT/AVAX and gOHM/AVAX.
- WHEAT/AVAX will add another layer of protocol-owned liquidity to the existing WHEAT/MOR liquidity position.
- gOHM/AVAX provides excellent exposure to both our partner’s ecosystem (Olympus DAO) and the chain we are in (Avalanche). This makes it an excellent option for an EBC with a high yield to buyback and burn WHEAT.
Note that we are also exploring other future bonds such as USDT that will serve the purpose of growing the aTriCrypto EBC.
Looking Ahead to Fantom (FTM)
As readers will know from our recent article looking ahead to Growth DeFi’s launch on Fantom, bonds on that chain will be available from Day 1, meaning we can bootstrap deep liquidity from the outset, and avoid selling pressure arising from otherwise paying incentives to Liquidity Providers.
Alongside our Hybridge — that will then be active on BSC, Avalanche and Fantom chains — this will keep more value within the ecosystem, support the massive burning of WHEAT through the exchange rate mechanism, and deliver the benefit directly to token holders.