Disclosure: I accumulated YFV/VALUE at $11, $8, $4 and $2.50 so far and I continue to average down as the price decreases. This does make me bias, but I hope the article provides a good general overview.
The token price of YFV/VALUE has been in turmoil for weeks. Many investors are angry after losing substantial amounts of money. Much of which blame the project team and their (sometimes) confusing actions. To understand the current situation, let's first take a look at the project history.
- 17 August 2020 — YFValue is born.
- 05 September 2020 — Launch of Value Liquid, an improved version of Balancer with a Uniswap interface.
- 05 September 2020 — Introduction of the VALUE token & more.
- 24 September 2020 — Introduction of Value Vaults.
- 06 October 2020 — Migration from Balancer to Value Liquid and a full rebrand from YFValue to Value DeFi Protocol.
- 14 October 2020 — Migration from Uniswap to Value Liquid.
- 16 October 2020 — Announcement of a new vUSD/vETH lending platform, YFV/VALUE migration deadline, Value Vaults beta completion and a new "Farms-as-a-Service" product.
- 24 October 2020 — Major improvements for VALUE holders are announced, including higher Value Vaults performance fees (14%) and a higher revenue share from Value Liquid (33%) for Governance Pool participants. The deadline for the YFV/VALUE migration is set to 04 November 2020.
As I said, a lot has happened since launch. The list above doesn't even include all the creation and migration between pools, and there were a lot. It also doesn't include that YFV hit an all-time high of about $84 on 02 September 2020, while it's currently trading at just about $2.50 (-96.7%). 🤯
Analyzing negative sentiment
Before its all-time high in September, the general sentiment towards YFValue was very positive. People loved it and the price quickly grew from $4 to over $80. It was at the same time that the sentiment started to change rapidly.
News made the round that YFValue would create its own version of Balancer. A more powerful protocol that they'd fully control, and would allow more benefits to be provided to its token holders and the platform as a whole.
The migration of these funds were the first round of negative sentiment, and the price started crashing. Just 3 days after hitting $84, YFV was suddenly trading a just $16. Much of the dump was caused by the fear of migrating liquidity from Balancer to the new exchange, as well as a severe price run-up of YFV.
A few days after that, the team added to the already confused and frankly, quite angry community when they introduced VALUE. This new token would eventually replace YFV but co-exist for now. Paired with arguably poor communication from the team and a Telegram that severely lacked moderations, it created a death spiral for the token.
Public sentiment shifted fast, leaving people disappointed with the team and looking for somebody to blame. It was during that time that I started getting interested in the platform.
Sometimes it's good to be late. ⏳
Rebrand from YFValue to Value DeFi
As part of launching Value Liquid, introducing the VALUE token, and rebranding their vETH and vUSD rebase tokens, the entire project decided to rebrand as well. Likely in an effort to leave their volatile and fud-driven past behind.
This did cause some additional confusion as, to most people, it just happened without an announcement. Overall, it didn't change much as the pool migrations as well as the VALUE token were already announced and well underway. It just added one more thing to confuse people into the mix.
A successful migration
Between 06 - 14th October 2020, millions of dollars of liquidity were successfully migrated from Balancer and Uniswap to Value Liquid. This was a huge milestone as it proved that the smart contracts worked as intended and more liquidity from other exchanges and farms could be migrated in the future.
More importantly though, it meant that the middleman fee was now unlocked. Instead of paying Balancer and Uniswap a fee on every swap, this revenue could now be reallocated to the protocol and its token holders.
Why does VALUE exist?
YFValue and the YFV token were created with trust in mind. The team burned their owner (minting) keys early on to build trust. While this certainly did build trust, it came hand-in-hand with some signifiant downsides.
The team said:
Given that YFV was created by an anon team in the midst of an environment full of scam forks, we decided to burn the owner key and the minter of YFV to earn the trust of the community. By comparison, YFI and YFII still maintain their governance keys, so the creation of more tokens through their multisig wallet is still possible (Source)
This meant that no more YFV could ever be minted, but it also meant that no protocol upgrades would be possible. It also meant that no new farming pools could be created. Overall, YFValue was stuck with nowhere to go.
On 05 September 2020, after passing the community vote with 99.87%, the team launched VALUE. This token would coexist with YFV until its emission was concluded and a migration would be complete. Both, tokens would have a 1:1 peg and same governance rights. No exact timeframe for the end-of-life of YFV was announced at the time which, again, led to more confusion.
Many of the exchanges still list YFV instead of VALUE, and much of the YFV supply is still not wrapped. At the time of writing, just over half (56.62%) are migrated, which leaves millions of YFV still out there.
With the deadline for the YFV migration recently voted on for 04 November 2020, it is now finally just a matter of time before we have clarification and hopefully a clear path for particularly new user to the ecosystem.
But can VALUE be valuable?
That's the million dollar question. Given that I have been accumulating VALUE for a while, I am clearly biased. But let's look at what currently provides value to VALUE and what could happen in the future.
While being probably the least interesting to you: governance. Value DeFi holds frequent votes on Value Improvement Propositions (VIPs). These are important as it lets token holders decide what to do next. In the latest VIP 7, the proposal included improvements for token holders, too. 👏
Currently, 0.2 VALUE per block are minted and distributed to the governance pool. The distribution and minting of those new tokens will end in about 170 days, but a new vote is coming up to change the schedule.
Value Liquid revenue share
After the latest vote (VIP 7), the revenue share of Value Liquid was increased to 33%. What that means is that 33% of the 0.3% swap fee Value Liquid charges is converted to VALUE (= buy pressure) and then distributed to the governance vault. The more volume, the more fees, the higher the APY.
If that rings a bell, it's similar to what CORE does right now. The main difference here is that there are no taxes on transferring VALUE or YFV. The value comes from voluntary transactions on Value Liquid instead.
Value Vaults performance fees
Another APY-driver are the Value Vaults. Early on they delivered APYs of 30% and more, while now having settled to still pretty acceptable rates. Here's the kicker: 14% of all profits generated are also used to buy back VALUE on Value Liquid and distribute to the governance vault.
The better performing the vault strategies are, the higher their APY and subsequently the returns for the governance vault participants. The team regularly working on new strategies, including so called "multiple farming strategies".
Phase 2 rollout week commencing 26 October 2020 will deploy new vaults with fully unlocked multi-farming strategies, auto-compounding rewards, and flexible token deposits.
If successful, this would further drive up rewards for the governance pool.
The latest addition to Value DeFi's ecosystem is Farm-as-a-Service (FaaS). After analyzing it and having spent several months in the DeFi space, I think this is a major deal that people don't understand yet.
It's true that every project can just fork any farm they want (e.g. Dracula, Sushi & co), redesign, and adjust it for their own token and schedule. But this does carry a significant risk for users of these new farms. Creators are often anonymous and have no trust going for them.
Common scams here include a hidden deposit or withdrawal fee, or worse, a bug or intentional design to be able to drain liquidity. Every time a new farm launches, experienced investors make sure to first check for these common risks before investing their hard-earned cash.
FaaS can alleviate this by building a reusable service that projects can use to fairly distribute their token through a trusted and (potentially) audited system instead. This would build immediate trust and likely attract much higher TVLs than normally, leading to a fairer distribution.
These projects would also have to provide liquidity to Value Liquid, which would attract trades, which create volume and therefore more fees. More fees means more buy pressure and higher APYs for the governance pool. 🙌
Lending Platform interest share
Also recently confirmed was a new Lending Platform for the vUSD/vETH rebase tokens. These assets were initially introduced as a further reward for the farmers, but this strategy however didn't plan out as intended.
In the announcement, the team says:
Today, we are announcing the creation of a decentralized lending platform that uses our Liquid DEX technology as its foundation and vUSD/vETH as its base currency.
Instead of killing the vUSD/vETH tokens, which so far had very little use and volume, the team decided to build a new product around it. As the Value DeFi protocol evolved to "become a full-suite DeFi ecosystem", they were looking for a "more elegant purpose that ensures it is more mission-driven".
I quickly checked in the official Discord to confirm if that new lending platform would also impact the governance vault. This was confirmed by Prod, a core team member, who said this:
Every product in the DeFi Value ecosystem must pay contributions. That's great to hear and further inspires trust in VALUE as a token, and a team that takes responsibility for their token holders.
In the case for lending, I'd assume that a cut of the interest generated is being used to buy back VALUE and distribute to the governance vault.
Having hung out in the Telegram and Discord chat for a while, I've seen recurring questions. After checking in with the team and adding some personal opinions, find below answers to some of the most common ones.
What is the actual market cap?
This is still cause of much confusion. I double-checked in the Discord and here are the numbers as the time of writing this article.
- YFV: 2.5M of 4.5M tokens migrated (about 56%)
- VALUE: 4.27M of 6.7M total supply minted so far
This brings the total supply to about 6.27M circulating tokens, while the total supply is fixed at 6.7M. At a current token price of about $2.50 this leads to $15.675M circulating and 16.75M total diluted market cap.
The circulating supply of VALUE currently increases in two ways. Whenever somebody wraps their YFV, an equal amount of VALUE is minted. Following that, the YFV are locked so the total supply doesn't change. The other way is by ongoing pool emissions (farming rewards).
You can get the latest numbers by checking the VALUE and YFV contracts. All YFV in the VALUE contract are locked. The actual circulating supply is calculated by checking the total amount of YFV, subtracting the amount of YFV in the VALUE contract, and then adding the amount of minted VALUE tokens.
Why is the price still dropping?
First of all, nobody controls the market, and nobody knows exactly why price moves into one direction or another. But what we do know is that the supply of VALUE is still expanding, as farming tokens always do.
Two reasons that I personally see contributing to a decline in price however are that there still is a seed pool, where yield farmers do not need to supply any VALUE to generate VALUE. Whales in the space can just deposit $1M of any stablecoin and virtually auto-dump VALUE as they come in.
Another reason might be that, after every price consolidation, there are a lot of token holders that bought high and slowly surely lose faith and sell at a loss. Particularly in a price move as big VALUE's, the transfer of tokens and therefore wealth might take a long time. Inevitably there will be more token holders that paid less for the token than the previous generation.
Just before releasing this article, the team announced what's coming this week. The top priority right now seems to be bringing back TVL as emissions are about to drop. This will be achieved by the aforementioned Farm-as-a-Service product, as well as more and improved Vaults.
Additionally, a complete UI revamp as well as the lending platform and NFT integrations are in the works. These are still in draft phase though, so don't expect them too soon!
As it stands, public sentiment of Value DeFi is very negative. Most people cannot see beyond VALUE being a governance token. If you're the type of investor that sees this as a positive, then this token might interest you.
Demand in the protocol's products is definitely there. When launching the beta WETH vault, for example, it filled its 20,000 WETH cap very quickly. The platform also announced their first Farm-as-a-Service partner, Sentivate.
As I stated in the beginning, I started accumulating YFV/VALUE at about $11. I will continue to accumulate as the price decreases and/or time moves on. With all the above, VALUE is what everybody is talking about: a revenue-driven token that rewards its users by having a working ecosystem.
Arcadia Group and Pessimistic also audited the project.
If you're interested in Value DeFi and the ecosystem it is building, I highly recommend their Medium and Discord. Telegram is also available, but as so often, the better conversations are to be had in Discord.
What's your take on Value DeFi and other "DeFi Ecosystems"? Are you done with governance tokens are do you see value in VALUE? 🙈 I'd love to hear your thoughts on Telegram.