RE: APY?

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marki99 in LeoFinance • 5 years ago

I don't understand why people claim it's a ponzi. No yield farm is a ponzi. the goal is to get the highest amount of liquidity possible in order to generate the highest trading fees.

There is a fact: liquidity attracts liquidity. Therefore adding incentive to LPs is a good way to get started.

People need to think about it this way. CUB - BUSD has a pool with massive liquidity. If no one trades CUB, price is fixed according to the ratio.

Then there is another pool with lots of liquidity, CUB - BNB. Again, in a world where no one trades, nothing happens.

However, we know BNB is volatile, basically like all cryptos. As BNB's price moves on exchanges, you automatically get an arbitrage opportunity through cub. For instance, if BNB goes up in price, while the ratio in the CUB - BNB pool remains the same, then CUB becomes valued higher in that pool then in the CUB - BUSD pool.

Arbitrageurs can immediately buy CUB using the CUB - BUSD pool and then sell CUB for BNB in the CUB - BNB pool. If they sell the BNB for BUSD, they will end up with more BUSD then they started with, completing the arbitrage.

Meanwhile those trades generate fees for liquidity providers. The higher the liquidity in the CUB pools, the more money is needed to arbitrage the prices. Therefore, more fees.

I don't see how this can be qualified of a ponzi. Or any yield farm for that matter. It is very speculative, yes, because people chase the incentive yield and not the trading fees. But at the core of the yield farming business, there are fundamentals, something everybody tends to forget.

5 years ago in LeoFinance by marki99

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edicted 5 years ago

Nothing you've said here couldn't be applied to an actual Ponzi.
Ponzi schemes can be very convincing.
Much more convincing than the rational you've given.
They are designed to be convincing.

Plain and simple: it's a Ponzi because it's unsustainable and those who got in first make money and those who enter late get their money transferred to the people who got in early. Plenty of people out there called Bitcoin a Ponzi, and they still do.

As it stands now, this entire project is centralized, and the network it sits on is centralized. It's double centralized with multiple attack vectors. Any Bitcoin maximalist would look at these tokenomics and claim this was a Ponzi. Because from Bitcoin's perspective: it totally is. There is no security here. Even the BSC farmers know it: and they still farm BSC. It's risky and you have to trust the dev team: A LOT. Rug-pulls & scams everywhere.

The only reason why things like this can exist is because Bitcoin exists. Bitcoin provides the ultimate security that allows other projects to branch out: getting riskier and more centralized for a potentially bigger risk/reward.

A new scam is launched every day.

No one should wonder why people would call CUB a Ponzi before proving itself.
Go farm some random tokens on BSC and you'll get it.
CUB is a random token to these people.
The fact that we trust CUB is not the standard: it is niche thinking based on trust/branding.

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marki99 5 years ago

A true ponzi has 0 fundamentals or activity going on. It just finds new invstors to get capital from and pays the old investors. With yield farming there are trading fees coming in to the system, which means the pie grows.

And ponzi schemes have nothing to do with centralization. You could have a completely decentralized ponzi scheme, as long as the protocol is set up in the correct manner.

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edicted 5 years ago

No such thing as a decentralized pyramid, friend.
Decentralization is built on flat architecture.

With yield farming there are trading fees coming in to the system, which means the pie grows.

First of all, over the next year CUB will have 1000% inflation and these trading fees you're mentioning are 0.17%.
A total drop in the bucket that means nothing to anyone.

There are dozens of these Defi Protocols that are legit scams.
Employing your logic all these obvious scams are actually not scams.
The logic itself is flawed.

The only way for CUB to not be a scam is if it receives constant development and becomes more sustainable.
Otherwise just stick to Bitcoin.

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marki99 5 years ago

No such thing as a decentralized pyramid, friend. Decentralization is built on flat architecture.

Wrong. Decentralized only means there isn't a central authority. You could have a flat structure at the top with many participants but then each participant has a pyramid below him. Don't know if I explained that well.

A federated system is not flat, but is decentralized. Any PoS or dPoS crypto with governance is not flat, but is decentralized. For ex the voting system on hive. Your vote counts more than mine, doesn't mean there is a centralized entity deciding you matter more than me. Just means you got a larger stake in the decentralized protocol.

Completely flat structures are the most decentralized. But it doesn't mean that other structures are centralized.

fees you're mentioning are 0.17%.

0.17% on trading volume though. BTW, the volume on every pool should be counted, not just CUB . Yesterday we saw that CUB did 600k in volume. With other pools it should be more than a million USD. Now, imagine that a farm manages to get a volume equal to the market cap of the farm token everyday. In CUB's case, that's 3 million USD or so a day. Using only a 0.17% fee and compounding this means that 85% of the farm token's marketcap will be generated from fees alone in a year. That's not insignificant at all.

Let's be conservative and assume that all of CUB pools together do only a million USD in volume everyday. That will allow earnings 23% of CUB's marketcap in a year. Which ponzi generates a return on equity of 23%? None, they all generate exactly 0%.

This revenue from fees attract liquidity providers which ends up burning CUB through the 4% fee. So a yield farm token captures significant value from trading fees.

There are dozens of these Defi Protocols that are legit scams.

I agree, but only because they will remove liquidity they initially promised they would provide, or because they promise to deliver on some developments which they never intended to really work on. That's a scam, yes, but still not a ponzi. Because even though they scammed people into a project they don't work on, the project still generates money from fees. It's still a scam though because the performance will be underwhelming compared to investor expectations, based on lies by the developers.

The only way for CUB to not be a scam is if it receives constant development and becomes more sustainable.

I agree. Because Leo promised to deliver on that, and we all expect them to. If they do nothing, they would be a scam, but not a ponzi. Since we already are earning from trading fees.

I think in the end it comes down to a debate about definition. A scam is not necessarily a ponzi. A ponzi is a particular kind of scam that promises returns on money, but never even tries to generate returns and instead pays old debt with new debt.

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