The Tomb Fork Saga : Chapter 2
Get ready for Vampcoins
They’ll soon flood the blockchain ecosystem. They are easy to set up and will suck the life of the blockchains that host them. Get ready for them to thrive.
The first algorithmic stablecoin I came upon was TOMB, on the Fantom Opera blockchain. I explained how it works in How Tomb Finance is feeding on the Fantom Network.
Vampcoins are easy to set up
All you need is:
- a stablecoin pegged to a native token (TOMB pegged to FTM)
- a printing token: TSHARE. During over-peg periods, TOMB are printed. These new printed TOMB are distributed to TSHARE stakers.
- a freeze token: TBOND. For freezing your losses during under-peg periods.
This is not as easy as creating an ERC-20 token, or an NFT token, because you need to create 3 algorithmic tokens, so you have to deploy at least 3 smart contracts. But Tomb Finance has already written them so it’s just a matter of a few copy and paste and gas fees.
So, how does it work? Easy. I’ll use the TOMB / FTM pair example here, because this was the first algorithmic token. It spread on the Fantom Opera network but soon, all blockchains will have their vampcoins. There will be vamp-eth, vamp-avax, vamp-matic, vamp-bnb, …
- FTM price goes up on the crypto markets
- So TOMB gets under-peg: TOMB holders are at a loss. They are incentivised to swap their TOMB for TBOND (the freeze coin).
- But there is more: they are incentivised to sell their FTM to buy TOMB at a cheap price to swap for TBOND. This puts a sell pressure on FTM.
- When TOMB gets back to peg, TBOND holders cash in their gains by swapping back their TBOND for TOMB.
- Now FTM price goes down on the crypto markets
- So TOMB gets over-peg. TOMB holders could be incentivised to sell their TOMB for FTM, but NO!!! This is clearly not what a good vampcoin would do, as it would put buy pressure on FTM and sell pressure on TOMB.
- As TOMB is over-peg, the money printer is started: it’s TOMB rainy season and all new printed TOMB are distributed to TSHARE holders.
- When TOMB gets back to the peg, the money printer stops. TOMB circulating supply has inflated, and you have more TOMB.
This is very smart machinery. The incentives all fit very well together and the result is that TOMB is feeding on every FTM price move, either on the up side, or the down side.
As attracting as a Casino
One of the reason Tomb Finance has so much success also resides in the user experience. Unlike normal crypto trading, where you just swap tokens, these algorithmic stablecoins are full of calls to action: users are incentivised to stake their liquidity pool tokens at the cemetery, stake their share tokens at the masonry.
Even when the algorithmic token is going south, you can swap your tomb tokens for tbonds ...
The cemetery, the masonry, the pit, ... all these different staking places allow you to adopt different staking strategies.
For crypto investors, playing with these seigniorage algorithmic stablecoins is a real game in itself.
How about 2omb?
TOMB already has a few copycats on the Fantom Network. And their rewards are much higher than the original. That is because the wider the swings around the peg, the bigger the rewards.
2OMB is much smaller than TOMB, so it swings much more around its peg. So its rewards are much higher.
As you can see in the screenshot above, 2OMB is currently 22% over-peg. Which means it has to inflate its money supply by 22% to get back to peg: it’s 2OMB rainy season for 2SHARE owners!!!
Just because FTM went down, 2OMB got over-peg, and money is raining on 2SHARE holders. If you are a 2SHARE owner, you make profits when Fantom native token is going south.
This is how vampcoins profit of their native token price moves.
Where this is all going …
So where will this all go? Will the native coin upward price actions, at some moment, be completely suppressed by vampcoins? Will big vampcoins be outcompeted by small vampcoins, which will become big vampcoins, which will be outcompeted by smaller vampcoins, which …
I have honestly not the faintest idea where this will all lead us to. The dynamics are complex and fascinating.
Please, stay tuned if you want to learn more about my discoveries and reflections about these funny vampcoins.
You can also follow me on Twitter: https://twitter.com/MetaZebre
Edit: Ignorant I was, when I wrote this article, to believe that vampcoin were coming in the future. Actually, vampcoins are already among us.