DeFi 2.0 token pool “forked” in 24 hours – What happened?

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2021-10-16 13:06:30

Yesterday, DeFi 2.0 projects suddenly became the focus of the market, with impressive growth numbers (both in price and TVL). However, the wind suddenly changed direction today, when this project group had a sharp decrease. So what happened? Let’s find out in the article below!

DeFi 2.0 token pool “split in two” in 24 hours – What happened?

The difference of DeFi 2.0 projects

As mentioned in the article “DeFi 2.0 – Future trend or simply the title “unreal”?”, the obvious difference between 1.0 and 2.0 group lies in the purpose of optimizing capital flow. DeFi 1.0 were early projects with congested liquidity pools and DeFi 2.0 was born to optimize this backlog.

In addition, DeFi 1.0 considers Yield (farming rewards) as the target audience, while DeFi 2.0 targets the liquidity sources (Liquidity) in these pools.

The wind “suddenly” changed direction

The twitter account of Adam Cochran (member of Cineamchain Ventures) posted an image this morning, describing the entire performance of the current DeFi market:

The performance of the DeFi 2.0 group was not very positive, as representative projects such as OHM, SPELL, RGT, TIME, etc. all had a strong decline after yesterday’s impressive performance.

Token price fluctuations of some typical DeFi 2.0 projects at 12:30 PM on October 15, 2021

So what happened?

It is easy to see that 2.0 projects depend largely on the Olympus DAO flagship, when Time Wonderland is the fork on Avalanche of this project, and Rari has created a support pool for the OHM token.

This morning, Olympus DAO announced version V2, with changes in terms of governance mechanism.

To understand these changes, check out the Olympus operating description below!!

>> See more: Olympus (OHM) – The DAO trend leader or the new “pyramid model”?

Of these changes, the most notable are Bond array. As mentioned in the previous version, but those who contribute LPs and buy Olympus Bonds will enjoy a certain discount. This means they will be buy OHM below market price at that time and this token will be Vesting (unlocked) gradually.

However, the new change in V2 wants to “help” users not have to do too many operations to save gas. Therefore, the amount of tokens purchased through the Bond form will be staked and will only be unlocked for the buyer on the maturity date. The maturity periods are chosen by the buyer, ranging from week to week.

This invisibly creates 2 quite negative effects for the side Bond buyers mixed the Stake.

On the Bond buyer side, they will be more limited than their liquidity, no longer actively selling OHM tokens to the market as before.

Compared to the peak on October 13, the value of Treasury, or collateral for OHM, decreased slightly. This is the temporary reaction of the Bonders after the above announcement from Olympus. Notably, stable mortgages like DAI or FRAX were the biggest losers.

To the Stake people, the decrease in collateral in the Treasury makes OHM token holders in the pool feel unsafe, which invisibly creates a pressure for them to withdraw tokens from the pool and sell. In addition, in the near future, APY will also gradually decrease, making the breakeven time of stakers longer, making the game more difficult for this group.

Domino effect

As noted above, pretty much every product depends on Olympus. Time is a fork, so the impact on the price of this project is more in terms of news, fomo psychology of participants.

Meanwhile, sOHM is also an asset in many baskets of collateral for the Rari project. Therefore, the impact from Olympus also made this project a bit volatile this morning.

Liquidation pressure has reduced the value of liquidity provided in the largest Teranode’s Locker pool on Rari Capital (also known as Pool 6) from 716 million USD on the morning of October 14 to only 440 million USD on the morning of October 14. noon on October 15, before recovering to $546 million at the time of editing.

Pool number 6 on Rari Capital at 11:40 AM on October 15, 2021
Statistics of pool number 6 on Rari Capital at 12:10 PM on October 15, 2021

However, the amount of sOHM offered on Rari recovered to $371 million, accounting for 68% of Rari’s entire Pool 6 value. This number is equivalent to more than 1/3 of TVL 905 million USD on Rari at the time of writing.

OHM weighting parameters are available in Pool 6 of Rari Capital at 02:50 PM on October 15, 2021

Ending

Undeniably, the problem that DAO organizations in particular and the 2.0 project team in general solve is very attractive. However, if the management and coordination mechanism is not appropriate, it can completely lead to a chain of “snowball” reactions and system collapse.

New developments from these new products will be continuously updated by CHK.

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