The Tomb Fork Saga : Chapter 6
Yesterday, I told you how I had got my hands ( and my soul? ) dirty, by starting to stake shares on 2omb.finance. Money started to pour over my wallet in the form of 2omb.
The compounding share skaters
Charles Ponzy around 1920 …
As I wasn't really confident in the protocol, I was selling my freshly minted 2ombs for FTM in the first room of the casino (See my last article where I explain the metaphor of the 2 room casino).
This selling of 2omb for FTM should apply sell pressure on 2omb, and buy pressure on FTM, … and deal a huge blow to my vampcoin theory.
Above all, it should have lowered the price of 2omb vs FTM, pushing 2omb back to its peg, and demonstrate that the incentives of the protocol were efficient and well designed.
So why was 2omb still straying off its peg, always going higher up against FTM?
I went to the second room of the casino and looked at what the other share stakers were doing : they were not acting like me. They had faith in the protocol and they used all their freshly minted 2omb tokens to ... buy more shares and increase their return next time.
Apart from a few unfaithfuls like me, none of the newly minted 2ombs were leaving the second room of the casino, as they are supposed to be.
So, no sell pressure for 2omb, hence the 2omb price doesn’t go down back to peg, as the protocol was expecting.
Instead, as new minted 2ombs are only used to buy 2shares, the 2omb minting simply fuels the price of 2shares, that shoots up to the sky.
New players entering the casino
Ok, 2omb does not go down, but why does it go up? Well, simply because there are newcomers to the casino. To join the game, they start in the first room, by staking 2OMB-FTM LP tokens, which means they need to provide liquidity to the 2OMB-FTM pool, which means that in the first place they need to buy 2OMB, which pushes the price up.
This is a bad situation for the protocol, as it fails on its promise to deliver a stable coin correctly pegged to FTM.
This is bad news for the newcomers who pay a terrible premium on 2OMBs to enter the game. And if they take the shortcut I took and directly buy 2shares, here again, as the price of share is also pumping, they still pay a big premium over those who were there first.
But this is a very good situation for share stakers that got there first: a rain of 2ombs is falling on their wallets, and these precious 2ombs are currently bought at a 40% premium by people who want to enter the casino.
When you take that perspective, my vampcoin theory goes down to the toilets, and the alternative theory shows up its face: we have an elaborate ponzi scheme disguised as an algo-stablecoin.
A dead body from 2018 …
My case was drawing to an end. I was a bit disappointed as I was expecting a wicked new kind of parasite algorithm feeding on its host that would change the landscape of the blockchain, and all I was about to find was some petty crook running a ponzi.
All I had left to do is figure out the endgame, how the whole system would collapse, and maybe find a way to take advantage of the crash.
I needed a break. I bought a nice bottle with the cash I was still getting from the 2omb casino, and went back to my house. I did not want to hear about TOMB, TSHARE and TBOND any more for the evening. My plan was to tidy some piles of old newspapers and think about something else.
I didn’t know I would end up digging up some dead body from 2018 …