I think it's about time I talked about @tombfinance on the $FTM network. This 🧵 will cover:
- Protocol Overview
- The protocol’s tokens including $TOMB, $TSHARE and $TBOND
- How $TOMB stays pegged to $FTM
- Yield opportunities
- Possible downsides
- Protocol Overview
- The protocol’s tokens including $TOMB, $TSHARE and $TBOND
- How $TOMB stays pegged to $FTM
- Yield opportunities
- Possible downsides
Due to how Proof-of-Stake (PoS) networks work, $FTM must be locked up in staking contracts to keep the fantom network running. This leads us to the idea that eventually there won’t be enough $FTM to go around.
@tombfinance aims to fix this by creating a mirrored, liquid asset, $TOMB. This $TOMB token will then be usable in DeFi while leaving $FTM available to secure the fantom network.
So what are the protocol's different native tokens, and how do they capture value?
The $TOMB token is algorithmically pegged to the $FTM token and hence captures value from the appreciation of $FTM.
The $TOMB token is algorithmically pegged to the $FTM token and hence captures value from the appreciation of $FTM.
The $TSHARE is the protocol’s governance token. Once staked, it is entitled to a minimum of 35% of all newly minted $TOMB. It captures most of its value from the adoption of $TOMB.
The $TBOND is the protocol’s mechanism to keep $TOMB pegged to $FTM. $TBONDs can be minted by burning $TOMB when $TOMB is below peg, and $TBONDs can be burned to mint $TOMB when $TOMB is above peg. $TBONDs capture their value from arbitrage of the $TOMB - $FTM peg.
So, let's look at how $TOMB is brought back to peg during both expansionary and contractionary phases.
Expansionary periods are periods of increased $TOMB demand, which lead to $TOMB trading at a premium to $FTM. To counteract this, the supply of $TOMB must be increased to match the increase in demand.
During these expansionary periods, $TOMB is minted and distributed to 2 different locations.
- $TSHARE stakers
- Treasury fund
- $TSHARE stakers
- Treasury fund
$TSHARE stakers in the Masonry receive 100% of newly minted $TOMB when the available treasury balance exceeds $TBONDs, but decreases to 35% if the $TBONDs exceed the treasury balance (phase of repaying debt).
The treasury fund receives 65% of newly minted $TOMB until the available treasury balance exceeds that of $TBONDs. As discussed earlier, these treasury funds are redeemable by burning $TBOND to receive the underlying $TOMB.
On the other hand, we have contractionary periods, which are periods of decreased $TOMB demand. This results in $TOMB trading at a discount to $FTM. During times like these, the supply of $TOMB must be decreased to match demand.
To do this, $TBONDs are issued at a 1:1 ratio with $TOMB. Anyone can burn their $TOMB for the equivalent amount in $TBOND.
So, how can you profit from this protocol? Let’s look at the two main yield opportunities.
1. $TOMB – $FTM LP (125% APR)
Provides high yield on $FTM with low risk of impermanent loss due to $FTM and $TOMB being stable in terms of one another. Yield is paid out in $TSHARE.
1. $TOMB – $FTM LP (125% APR)
Provides high yield on $FTM with low risk of impermanent loss due to $FTM and $TOMB being stable in terms of one another. Yield is paid out in $TSHARE.
2. $TSHARE staking (currently 233% APR)
The $TSHARE staking APR changes with $TOMB phases:
- Contractionary Phase ($TOMB < $FTM) = 0% APR
- Debt Phase (Treasury Balance < $TBOND, $TOMB > $FTM) = 233%
The $TSHARE staking APR changes with $TOMB phases:
- Contractionary Phase ($TOMB < $FTM) = 0% APR
- Debt Phase (Treasury Balance < $TBOND, $TOMB > $FTM) = 233%
- Expansionary Phase (Treasury Balance = $TBOND, $TOMB > $FTM) = 640% (approximate based on my calculations)
Possible downsides and risks (ONLY THEORETICAL):
1. There may be a reduction in $FTM’s price appreciation due to $TOMB effectively increasing $FTM’s supply.
1. There may be a reduction in $FTM’s price appreciation due to $TOMB effectively increasing $FTM’s supply.
Speculators who expect $FTM’s price to increase could theoretically buy $TOMB instead, this would lead to $TOMB being above the $FTM peg and result in the protocol entering an expansionary phase, leading to new $TOMB being minted. This only refers to speculation.
2. $TOMB loses peg to the downside.
If the market loses confidence in $TOMB keeping peg, no one would be willing to buy and burn $TOMB for $TBONDs when in a contractionary phase. This could result in $TOMB permanently staying below peg.
If the market loses confidence in $TOMB keeping peg, no one would be willing to buy and burn $TOMB for $TBONDs when in a contractionary phase. This could result in $TOMB permanently staying below peg.
If this were to occur, $TBONDs could never be burned back for $TOMB, and $TSHARES would have 0% APR, rendering them both useless.
Hope you all enjoyed the thread! Was exciting looking at projects in another ecosystem for once. More to come!
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