Polygold DeFi on Polygon: brief report
Shortsegments' DeFi News: Volume(1) Number(1)
Today I am writing about interesting and potentially good investments. As always do your own research. Today I would like to introduce you to a DeFi project in the Polygon DeFi Ecosystem.
Polygon is for those of you for whom this is a new name, a second layer token project on Ethereum. So it is aligned with Ethereum as a decentralized project, it is Ethereum Virtual Machine compatible, so Ethereum projects are migrating there like Curve, AAVE, etc and it utilizes Ethereum security, a huge point for fund protection.
POLYGOLD
A NEW DEFI FARM ON POLYGON/MATIC
This new DeFi platform started very recently on Polygon, the near 2nd layer solution on Ethereum which appears to be the biggest DeFi Ethereum on its current crop of second layer Ethereum speed/cost/capacity solutions.
Polygold is different however, from possibly any other ethereum solution, or DeFi project in general, in that they have decided not to employ the usual strategy of using the deposit fees and transaction fees to buy and burn tokens. This is how your typical DeFi project controls the negative effect that high APRs, massive token production, and subsequent token sales have on token price.
The Problem they are trying to fix
The typical DeFi project initial high APR attracts yield farmers solely looking for high yields who farm today and run away as soon as APRs fall from astronomical heights. This yield farming is risky and involves moving large amounts of capitol in and out new projects, to garner large profits from initial high APRs and escape before hackers and rug pulls happen. These are the rabbits or gazelles of the DeFi ecosystem, nervous investors who are constantly ready to pull liquidity and run.
This selling pressure makes price go down.
A lot of the selling pressure comes from pools and farms involving non-project specific tokens, where the yield farmer earns and sells project token daily, to invest in their preferred non-project token. Projects adjust their multiplier distribution pto disincentivize this behavior, by moving the highest multiplier to project token pools and farms.
The way they are addressing this differently
Multipier and APR Reassignment
They have deployed the measure of the biggest multiplier and the biggest APR to their project specific token pools and farms. They also shrink the multiplier and the APR for the non-project token pools and farms.
No longer buy back tokens and burn, instead invest to pay a dividend.
They have also decided not to burn tokens, but instead limit token issuance as an alternative way to deal with token inflation reducing token price. Basically the most popular way of dealing with token inflation reducing price, is to buy back and burn tokens to reduce the number of circulating token. Polygon decided that instead of a buy back and burn, instead reduce the number of circulating token, they would limit the token number issued from the beginning. So once they issue x-tokens there are no more.
BUT…
They create token value by using deposit fees and transaction fees to buy other cryptocurrency tokens like DAI, USDT, etc and invest them in pools like Curve or Balancer, to provide a dividend for holders of the project token. So it becomes something completely new entity: A Dividend token.
The DeFi world is changing quite a bit…
Leofinance Signature May 2021
Shortsegments is a writer focused on cryptocurrency, the blockchain, non-fungible digital tokens or NFTs, and decentralized finance.
Read more of shortsegments articles here: @shortsegments
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