Degen Defi; Adventures in Wonderland

Down the rabbit hole I go . .

After far too long not paying any attention to this blog and having to rescue it from outdated security certificates, I’ve decided it’s time to return.

Confession time: I’ve been caught in a trap of inferiority paralysis.  Reading articles from other bloggers and realising that I’d struggle to meet their standards.  But then I snapped out of it.  I’ve read many wise people say “done is better than perfect” or words to that effect.  Anyway, lets be honest - I don’t think there are hundreds of readers hanging around these parts.

To that end I thought I’d keep it brief so as to not put any pressure on myself.

After starting to descend down the crypto rabbit hole almost exactly a year ago, discovering the basics of Bitcoin and Ethereum, I’ve since continued this journey of discovery and descended even deeper.  I’m now vaguely familiar with terms such as layer 1, layer 2, Non Fungible Token (NFT), Decentralised Finance (DeFi) and Decentralised Autonomous Organisation (DAO).  It’s the latter that is the subject of this post.

A quick summary of a DAO.  An organisation controlled not by people, but by smart contracts on a blockchain.  These smart contracts contain the rules that the organisation follows.  Tokens are issued that allow voting on matters relating to the DAO.

Enter Wonderland.  A friend sent me a link to this project and initially we had a bit of a laugh at the preposterous ~70000% APY figure.  An evening or two YouTubing and DuckDuckGo’ing later and my initial ‘definitely a ponzi scheme’ judgment had now decreased to ‘probably a ponzi scheme’.  It turns out that Wonderland is a fork of another similar project called Olympus and this has been running since May 2021 and is still going strong.  It also has a public (slightly controversial) founder, Daniele Sesta.  Olympus is built on the Ethereum blockchain and Wonderland on Avalanche, a newer competitor aiming to be faster and cheaper than Ethereum.  The narrative is ‘Decentralised Reserve Currency’.  You can ‘mint’ the TIME token with a variety of assets at a discount in exchange for a holding period of a few days.  TIME can also be purchased directly and staked.  It’s the staking mechanism that yields the preposterous APY.  The APY of course refers to the token, the price of which can vary, so should be viewed as an advertising strategy to lure the naive.  Ironically nothing looks very ‘autonomous’ to me.  The founder seems to make unilateral decisions at the moment.  We’ll see if that changes.

Anyway a while later, the same friend let me know he’d purchased and staked £200.  The plan was to wait and see if it doubled.  If so, withdraw the £200 and let the balance ride.  Not wanting to miss out on the fun (and nothing to do with the fact it might make an interesting blog post), I purchased and staked £100.  The plan is to wait and watch with no withdrawals.  I’m a baller like that.

So why on earth am I getting involved in something that has an enormous chance of failure, even if only with £100.  At time of writing, Wonderland is reporting $1.48 billion of TVL and a treasury balance of $806 million.  In other words if everyone cashed out now, you’d only get a tad over half your money.  Is that better or worse than most central banks?  Genuine question because I haven’t checked.  Anyway I digress.  The answer is curiosity and learning.  I’ve found that the best way to really understand anything is to take get involved.  While studying engineering, lecturers would describe concepts with formulas, descriptions and diagrams with varying levels of success.  For me it was only when writing code and watching registers change in a microcontroller or building a circuit and watching voltage waveforms on an oscilloscope that a concept would be fully understood.

Performance so far:

Date Qty TIME Price Value IRR
31/10/21 0.020348 £4914.48 £100
09/01/22 0.072169 £1627.98 £117.49 131.74%

I’ll keep you posted . .