The Sesta Trifecta ($SPELL, $TIME, $ICE): Beginners Guide
A breakdown for beginners of the 3 major projects made by Daniele Sesta
All the hype in the DeFi space right now is around Daniele Sesta. The king of #FrogNation. Daniele and his team have made the #OccupyDeFi movement a reality through their relentless building and innovation. In this beginners’ guide, I will introduce you to something that I like to call the Sesta Trifecta. Abracadabra.money, Wonderland.money, and Popsicle.finance are the three projects that I will dive into.
As the name suggests, it’s literal magic. Let’s run through what it does. A popular strategy in DeFi is to deposit tokens into different protocols and earn yield on them. You can do this through many ways, you can go to Yearn.fi and browse through the different vaults they offer and deposit tokens to earn a certain amount of yield or you can stake your tokens in a protocol and get a token in return that represents your staked position which earns fees from the protocol (ex: SUSHI to xSUSHI). In both cases you get an interest-bearing token (ibTKN) that represents your locked up position. Rather than having so much capital just sitting idle, you can take these ibTKN’s and make your way over to abracadabra.money, go to the Borrow tab, find your ibTKN and deposit it as collateral in the protocol and abracadabra you now have $MIM. $MIM or Magic Internet Money is a USD-pegged stablecoin (Much like USDT, UST, USDC, DAI). You have now just deposited a token, that is still earning interest, as collateral for a loan and can now participate in other parts of DeFi with MIM. As I said, literal magic.
Conceptually, it’s very similar to something like the liquid staking function made by Lido. Where you can stake your $ETH to secure the network and earn your yield, but you can still keep that capital active by getting stETH in return to use in DeFi.
But maybe using yearn or staking your tokens isn’t your preferred strategy of earning yield. You would rather be a Liquidity Provider (LP) for a Decentralized Exchange (DEX). Well no need to fear. When you become a LP you get a LP token to represent your position in the pool. You can now take those LP token which would’ve otherwise just been sitting idle and go to the Farm tab, find your respective LP token and stake it. However, this time you get $SPELL in return. $SPELL is the native token of the protocol but the true wizardry of $SPELL is unlocked by staking it. When you stake it you receive sSPELL (much like xSUSHI) and sSPELL can be used to participate in the protocols governance while generating value to the user by redistributing the fees generated by the platform to sSPELL holder. Abracadabra generates fees in the following ways; one way is through the initial fee paid to the platform to execute your borrow request, and the other way is through fees collected from the interest paid and the debt paid. From these fees generated 75% is redistributed to sSPELL token holders proportionate to their staked position, 5% is sent to the treasury for emergency cases such as weak market condition, and 20% to the governance treasury. To clarify, when I say redistributed to sSPELL holders it means that the fees generated are used to buy more $SPELL and send that to sSPELL holders so when they unstake their position they get their initial staked $SPELL tokens + the additional $SPELL generated through the redistribution mechanism.
But wait, you thought it stopped there? Remember I said the team are absolutely relentless when it comes to building. Well, with updates to the protocol, even more strategies have been unlocked. One update was to allow you to borrow against regular ERC-20 tokens. If you own tokens such as SHIB, FTT, FTM, ALCX, AGLD etc you can use them as collateral in abracadabra and borrow $MIM against it. This is fairly straightforward, but an even more impressive innovation is the degenbox. The degenbox allows you to generate yield on non-interest bearing tokens and creates cross-chain yield strategies. Let’s look at one strategy to better understand the degenbox. This uses the Terra blockchain and its native stablecoin $UST.
· Step 1 – deposit UST into something called the cauldron and get MIM in return
· Step 2 – from the cauldron 85% of the UST will be bridged to the Terra Blockchain (via shuttlebridge) and 15% will be kept in the cauldron on the Ethereum network. 15% is kept back to allow smooth withdrawals for users
· Step 3 – The bridged UST is deposited in to Anchor Protocol on the Terra blockchain where it generates around 18%-20% yield and also gives you aUST in return that represents the staked position
· Step 4 – The aUST is bridged back to Ethereum and kept in the cauldron. The degenbox sends a portion of aUST back to Terra every week to keep harvesting the yield and bringing it back for users to withdraw their deposit.
· Important note – The amount you withdraw from the cauldron is limited. As mentioned 15% is kept back to allow smooth withdrawals for users but if a withdrawal is very large then you have to wait a little longer and do it over multiple transactions.
Abracadabra does a lot of things for the DeFi ecosystem. It increases overall capital in the system and also increases capital efficiency. It generates value for all parties whether you are a holder or user. While growing their own protocol it also helps other protocols along with it. It will bring more usage to Yearn, Curve, Anchor and many more which means that it is growing the DeFi ecosystem as a whole.
OlympusDAO (OHM) was a game changer for the DeFi space in terms of tokenomics and protocol design. It pioneered the DeFi 2.0 movement. As is common in DeFi, something that is new and wildly successful will get forked multiple times with a few tweaks. Wonderland.money is an OlympusDAO fork on the Avalanche blockchain. The aim is to build out a decentralized reserve currency that is backed by a basket of only crypto assets in order to completely detach from traditional financial instruments.
Before understanding the extremely high staking APY, it is important to understand the purpose of Wonderland. Other than the fact that it aims to create a truly decentralized currency, it aims to achieve total protocol owned liquidity. If you’ve noticed, many protocols try and attract liquidity through incentivizing users with extremely high rewards. Liquidity is the most important thing in DeFi because if your protocol loses liquidity, it dies a quick death. However, so far projects have figured out how to attract liquidity but not how to retain liquidity. They essentially rent liquidity from users with unsustainable incentives. OHM created the concept of protocol owned liquidity which is also being used by Wonderland.
The first step is bonding. Bonding is a way for users to get $time tokens at a discounted price. This discounted price is received in exchange for LP tokens. When users provide liquidity to a pool like TIME/USDT, they will receive LP tokens to represent their positions. Users can then give Wonderland ownership of these LP tokens in return for a discounted price on $TIME. For example, a user gives TIME-USDT LP and gets a 10% discount on $TIME. So now Wonderland can gradually gain total control of their protocol, but you may be wondering why won’t people just sell the discounted tokens for a consistent profit? Wouldn’t this create infinite sell pressure? Well, this is where staking comes into the picture. Overtime, more $TIME tokens are emitted, these are issued to the bonders, but also the stakers, so the high APY staking is an incentive for bond purchasers to lock their tokens rather than selling them. Important to note, those who bond in Wonderland are known as Minters.
By staking the tokens, you are essentially locking in your share of the protocols owned liquidity. You aren’t making money per se. For example, if you have 1 $TIME today and stake it for 70,000% APY, it means that in 1 year you will have 700 $TIME. Basically, you have more tokens but you haven’t technically earned money because your share of the protocols liquidity remains the same. The staker only makes money when the marketcap of the protocol grows. With a significant amount of protocol owned liquidity, Wonderland can become a powerhouse by directing that capital into place where it can help further grow the protocol.
Personally, I think this is THE killer DeFi app. It’s game changing. Assuming that you’re a beginner, you may have read a couple of articles about certain protocols and how DeFi works. But like most beginners (I experienced this as well) you may have been overwhelmed by the sheer complexity of the landscape, and rightfully so. For most people, navigating through DeFi can be extremely complex. So many different technologies, so many different strategies, and so many different versions of similar protocols but with different tokenomics and it can all get very confusing if you’re just starting out. However, you know that the earning potential in DeFi is just too sweet to ignore. Regardless of how tricky it is, you know you have to figure it out.
Popsicle finance changes this, rather than spending months and months going through multiple whitepapers and testing out different strategies, you can just use popsicle finance. It aims to provide multiple automated strategies to give users the easiest access to that sweet DeFi yield. Additionally, it aims to manage and optimize liquidity across multiple chains. Currently offered on 4 chains, Popsicle Finance embraces the concept of a multi-chain future while recognizing that fragmented liquidity is a major flaw. Using a certain chain over another is the choice of the user, no user should be alienated from the earning potential in DeFi due to their choice. Everyone deserves to have the chance to optimize their earning potential. Popsicle is live on ETH, Fantom, Binance Smart chain, and Avalanche with more potential integrations on the way.
The first product is Sorbetto, rightfully named after a delicious Italian dessert because of how sweet the yield for users are. Sorbetto at a high level is a yield aggregator and yield optimizer. Being a LP (liquidity Provider) is profitable and beneficial but it is hard to do correctly, so many different strategies each with their own complexities makes successful execution for the average user extremely difficult. Sorbetto allows you to become a LP without having to do the extensive background work or having to carefully monitor and adjust your LP position. In its current state, Sorbetto can be broken down into 2 key products, Sorbetto Fragola and Sorbetto Limone.
The strategies of Sorbetto Fragola are specifically focused on Uniswap V3. Uni V3 brought along this concept of concentrated liquidity. Previously you would deposit your tokens into a liquidity pool at fixed ratio and a fixed price and then you would earn a portion of the trading fees, but this was relatively inefficient. The solution was concentrated liquidity. Concentrated liquidity allows you to readjust the ratio of your tokens you have in the pool and also allows you to choose a selected price range that you want to allocate in. For example, if you are depositing in the ETH/USDT pool and you think the most trading will take place between the $1000-$2000 range, you can set that as your range and manually adjust the ratio in which you want to provide the tokens (ex: 70% ETH 30% USDT) and whenever price trades within your range you get a portion of the trading fees. The tighter your range the more fees you earn. While this increases Uniswaps efficiency, it means the being a LP has become a little more difficult and requires more management. Sorbetto Fragola automates this process for you. You simply deposit the token of your choice into Sorbetto Fragola and it automatically deposits it on Uniswap and manages the position for you in such a way that you maximize your rewards without putting in any work. It will keep readjusting your position through their automated strategies and make you extract the most money possible from the LP position. They use historical data of volatility and price and ensure that your position stays in the most traded zone. So far, it has been very successful.
You get a PLP (popsicle liquidity provider) token in return that represents your position and when you want to withdraw you deposit your PLP token and the funds will withdraw at the ratio it’s at when you withdraw. So if the ratio is 50% ETH and 50% USDT at the time of withdrawal, you will receive the funds back into your wallet accordingly.
This concentrated liquidity mechanism is specific to Uniswap v3, but there are plenty of other DEXs where you can be a LP to earn rewards and trading fees. In the current DeFi landscape, there are now DEXs across many different chains that provide some juicy rewards. This is where Sorbetto Limone becomes your friend. Rather than spending months reading & learning about different chains and DEXs to figure out your best strategy, you simply deposit your tokens into Sorbetto Limone and it scans the DeFi landscape for you, figures out the best strategy to maximize your rewards and executes it. This doesn’t only allow you to be a LP with no effort but it also unlocks cross-chain liquidity. Through one platform users can provide liquidity to DEXs across multiple chains which essentially means it’s allowing the entire DeFi ecosystem to grow as it grows.
But it doesn’t stop there. They have more products. Frapped.io is the first non-custodial wrapper of tether on non-native chains. Basically, there is demand for Tether across almost every chain but it is only native to chains like Ethereum and Binance Smart chain. To increase the liquidity across chains and allow users to use tether anywhere without having to continuously wrap, unwrap and bridge it. Frapped.io is there to make USDT available easily on non-native chains.
Another product is the popsicle stand. This introduces the concept of farming as a service. Nowadays, whenever new products want to launch they have to think carefully about which chain they launch on to capture the most amount of users and liquidity for their pools. Most new projects launch with farming pools to incentivize early users to use their protocols. Popsicle finance just made this easier. Developers can now fill in an application which asks them about the parameters of the pool and their token. After it is accepted, the popsicle finance team will build out the liquidity pool and now the new project has access to users and liquidity from multiple chains. This product has the potential to make popsicle finance the hub for new projects to launch on as they can capture the most value from here.
Now that all the products have been covered, let’s look at the tokenomics for $ICE. The initial maximum supply of $ICE was $69 million and the main use of the token is to vote on governance proposals. I say ‘was’ because there was a token burn proposal which passed and that resulted in 44,842,141 tokens being burned. After the burn, the remaining tokens are distributed as follows:
· 19.99% - airdrops
· 8.57% - Initial Farm Offering (IFO)
· 28.56% - Team/Developers
· 27.33% - LP rewards
· 15.54% - DAO
The project is still in relatively early stages and what that means is that as the project grows the community can use the governance power of their token to vote on proposals for how the token can be used in the future. But there’s more, the governance system for $ICE is not a simple 1 token 1 vote system which allows anyone to buy a major chunk of the supply and sway votes in their favor. They use a quadratic governance system where the amount of tokens and the length of time those tokens have been held for are taken into account. So longer term holders and supporters of the project are given more power in the voting process. Furthermore, you can also stake your $ICE to get nICE. The benefit comes from the revenue generated by the protocol. The protocol takes a performance fee from all profits generated by the strategies of their products and this performance fee is redistributed to nICE holders in the form of $ICE tokens which you can claim when you unstake.
In December of 2021, Sushiswap had a major public debacle. Accusations of the core team enriching themselves, and mistreatment of employees by the CTO along with other accusations were rampant. The CTO left Sushiswap and the project seemed like it was left for dead. Low and behold, the king of the Frogs Daniele Sesta comes to resurrect Sushi. He has now taken total control of Sushiswap and will be using their deep liquidity DEXs across multiple chains to create something brilliant. It is still early days of the takeover so we are yet to see what the future holds for SUSHI but I am certain that it can only be good because Daniele Sesta moves fast, and moves with a plan.
This article merely went over the protocols and what they do but not the different strategies. There are tons of unique strategies where you can harness the power of all 3 protocols to amass massive yield. I personally haven’t tried these strategies but if you find the correct ADHD riddled turbo degens on twitter, then you can find some lucrative plays on Dani coins. Stay active and stay vigilant.
Thank You for reading,
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