Explosive Growth of TITAN — A study on Iron Finance & Polycat
Decentralised Exchanges and Automatic Market Makers — Part 3
Matic introduced fee-less transactions that are beginning to echo through the entire Defi ecosystem. Let’s take a look at the reflexivity brewing within the Matic network.
Polycat Finance — Polycat has integrated basic but interesting tokenomics. It’s a standard farming protocol with incentives to hodl the native token.
Polycat’s simple effective tokenomics are summarised as:
- Goose Finance Fork with native token max supply of 3,000,000
- 5 minute auto-compounding vaults with a 5% fee for buybacks
- Deposit and withdrawal fees used to create burn vaults will automatically buy-back and burn fish
- All vaults connected to AMMs pay in the AMMs native token (not directly in fish)
Polycat used the Goose Finance model and introduced the concept of a burning vault. Goose Finance utilises a 4% deposit fee on all non-native pools to help introduce the token to circulation. 50% of this fee goes towards the burning vault, 25% is used for direct burning.
Vault structure (compounds every five minutes!)
- 5% of the earnings from standard vaults are used to burn FISH. 🔥
- 100% of the earnings from burning vaults are used to burn FISH. 🔥🔥🔥
As of the time of this publication — the burning vault consists primarily of a stablecoin vault of the IRON-USDC variety paying out an insane 1.64% daily APR. This is a total burn of $54k per day at the current rate from only this single pool. Polycat burns of FISH are at $190k per day from vault performance (on a current market cap of $36m). This contributes both to reducing the supply of Fish & creating never-ending buy pressure (every five minutes!).
Running some quik math on this
- Current circulating supply — 1,512,128 (Market Cap — $36,173,551)
- Block emissions rate — 0.8 per block — 34,560 fish per day of which 10% is sent to the developer wallets. 31,104 remaining
- Current market price — $24.00
- Increase in Supply of $746,496 daily with a burn rate of ~$190,000 daily
- Net supply increase per day priced at $556,496 (note supply is capped!)
Polycat is just one of many farming protocols that has been wrapped Iron Finance.
What is IRON?
IRON is a token that is partially pegged to the U.S. Dollar. IRON’s peg is sustained through the minting and redeeming functions. The mint function requires a combination of USDC & TITAN at a variable ratio always worth $1 to mint one IRON. TITAN consumed through the minting process is burned and the total supply is reduced.
TITAN in it’s current state is burned faster than it is being minted. This is despite the current minting rate of 735,158 TITAN per day.
Iron Finance has not only utilised Polycat but also Beefy Finance, Eleven Finance, Adamant Finance and AutoFarm. The autocompounding mechanism creates automatic buy pressure on the IRON/USDC LP and sell pressure on TITAN. The frequency and permanent auto-compounding mechanism creates permanent buy pressure on the IRON token, stabilising the price at above $1 before arbitrageurs use the opportunity to mint IRON at a cheaper price and continuously burn more TITAN.
This is reflexivity at it’s best. Vaults are continuously compounding IRON/USDC. TITAN is being minted, immediately sold by the farms, and used to drive the IRON/USDC LP price up. Matic’s fee-less arbitrageurs then repurchase the TITAN for minting and burning. This activity drives insane volumes and profit through the entire ecosystem of AMMs, Yield Farms and Iron Finance itself.
The system seems to be working in perfect sync brewing up a storm… The question — how sustainable is this?
I am by no means your source of truth and this is not financial advice. Please DYOR.