Get to know ICP, FTM, CRV
Find out more about Internet Computer, Fantom, and Curve.
To complement our monthly "Under The Hood" where we go over what happened in Crypto and the Autopilot, we usually offer a deeper dive on background and performance on a selection of the crypto assets that Autopilot was holding. But we've already reviewed all of those in past articles, so this month we chose a couple from the investable universe which are timely and we found interesting: Internet Computer (ICP), Fantom (FTM), and Curve (CRV).
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Let's dive right in.
The Internet Computer (IC) is a blockchain created by the DFINITY Foundation with the goal of facilitating large-scale smart contract development. Because its nodes run on specialized hardware held by multiple independent data centers, it's nothing less than an attempt at redefining how consumers interact with the internet and the apps built on it.
The Internet Computer uses "canisters", which are similar to smart contracts, to allow developers to deploy and operate apps. The storage capacity of each canister is 4GB, which allows for sizeable apps to be deployed. The Internet Computer has two main tokens: "ICP", which serves as the network's governance token and reward mechanism, and "Cycles", a stablecoin created by burning ICP, which allows users to pay for computing resources and transactions.
The vision of the DFINITY foundation is to become the new infrastructure for the internet. The project was founded in 2016 by Dominic Williams and raised about $121M from a host of VC funds.
The Internet Computer was fully launched - and its code made public - on May 10, 2021.
Only independent data centers with a Data Center ID from the Network Nervous System, the open algorithmic governance system that manages the Internet Computer network, can run nodes. Potential node providers must submit an application to the Network Nervous System and meet minimal standards, as well as purchase specialized node computers, in order to be eligible for a Data Center ID.
So it's fair to say that the Internet Computer is one of the oldest and best-funded smart-contract platforms in Crypto. But it's definitely not the best understood or the most used. Which is quite probably due to the fact that it's trying to reinvent the web, which is no small feat, and that the technological complexity involved means that it will take a while for developers to understand and adopt the new paradigm. The vision is less about making an immutable ledger available (like Ethereum and the others it inspired) and more about building a completely open-access internet. It could even become the infrastructure that other chains, like Ethereum, rely on. Offering them an even greater level of decentralization.
They probably understand how "wild" their undertaking is since they are working with a 20-year roadmap and are giving themselves until 2026 to reach widespread knowledge of what the Internet Computer is among entrepreneurs. They are giving until 2031 to be on path to overtake Big Tech's proprietary ecosystem, and the full 20 years to actually get there. It is good that they recognise that the adoption of radical tech is slow and usually takes about a generation.
You can check out some apps already making use of Internet Computer: fleek to build websites, and social networking on Distrikt. You can create an identity on ICP following those steps. You can follow Mathieu on Distrikt here.
More at dfinity.org/showcase
Why is Internet Computer (ICP) whitelisted as an investable asset for Autopilot?
As explained in the section above, ICP is a smart-contract platform, and more. By addressing the problem of decentralization all the way to the infrastructure level, it could actually become a smart contract platform on which smart contract platforms run.
In accordance with the "fat protocol thesis", and our repeated agreement with that thesis, we elected to whitelist ICP for the Autopilot the same way we have whitelisted Ethereum, Avalanche, Solana, or Terra.
It was whitelisted and became investable in June of 2021. It has yet to be held in the portfolio.
Internet Computer (ICP) Market commentary
The reason why the Autopilot has stayed away from ICP is fairly understandable, however.
Indeed, ICP started trading at around 380€ when it came onto the market on May 10, 2021, and was immediately part of the top 10 largest cryptos. Such an entry into the market had never before been seen. But nine days later it was trading at 88€. It is now trading at 14€ and ranks 35th, just between the worthless Ethereum Classic and the upstart Fantom.
Its market cap of €3B pales in comparison to 2021's alternative smart-contract platform winners such as Terra (€33B), BNB (€55B), Solana (€22B), Avalanche (€17B), and Polkadot (€15B).
And even if it were to catch up to BNB and multiply its market capitalization by 18, the token price would still only be around €252. A far cry from the €380 at opening.
So if like the Autopilot does, you are looking for assets that don't lose too much value over time, ICP doesn't make the cut.
And it's probably a good thing that they have a 20-year roadmap. They've sure turned a lot of people into long-term investors too.
Fantom is an open-source Layer-1 blockchain that supports the development of several execution chains using a single consensus layer. Lachesis is the network's independent consensus layer, which uses the "Lachesis Protocol," a unique consensus method designed by the Fantom Foundation.
Lachesis can give security to a variety of additional layers, the first of which is Fantom's Opera smart contract chain, which is EVM-compatible.
Opera is a Proof-of-Stake (PoS) layer with a Lachesis-based validator set that validates transactions and generates new blocks. SushiSwap and Curve are two of the many decentralized financial (DeFi) applications already available.
With the support of Yearn Finance founder Andre Cronje, who was enlisted as a technical advisor to Fantom, the Fantom Foundation has shifted its focus to DeFi use cases.
Cronje has recently announced that he would "Quit DeFi" altogether because he finds the space toxic and that has been pretty bad for the FTM token in the very short term.
Due to the benefits provided by the Lachesis Protocol, the project's purpose is to host an ecosystem of execution layers while enabling them to feature rapid and cost-efficient transactions.
If you think it sounds like it's promising much of the same as Avalanche, Cosmos, Polkadot, Solana, Binance Smart Chain, Cardano, Polygon, Near, or Algorand, it's because it does. Fantom is - conceptually - very similar to all the other Alternative Layer Ones which have been all the rage in 2021.
Fantom has raised $40M from a bunch of VCs in a private round in 2018. But as is often the case with layer one networks the real value is in how many of their own tokens they own.
From the Liquid Supply Curve (courtesy of Messari.io) we can see that around 50% of the supply has thus far been released into the team, strategic reserve, or advisors & contributors. That's around 900 Million FTM which, at USD 1 apiece, makes for a sizable war chest. That's how they are able to launch incentives programs such as a USD 314M (in FTM) ecosystem fund.
The FTM token is used to pay for the network usage (transactions, interacting with smart contracts), secure the network through proof-of-stake, and vote within the on-chain governance system. It has a fixed supply of 3.175 billion.
Why is Fantom (FTM) whitelisted as an investable asset for Autopilot?
In accordance with the "fat protocol thesis", and our repeated agreement with that thesis, we elected to whitelist FTM for the Autopilot the same way we have whitelisted Ethereum, Avalanche, Solana, or Terra.
It was whitelisted and became investable in March of 2021, and the OSOM Crypto Autopilot almost immediately took a position in it. It was held in March, April, and May of 2021 and generally contributed positively to the performance. For the first half of 2021, it was even the 12th most contributing asset to the positive performance out of 21; the remaining 11 having all contributed negatively.
Fantom (FTM) Market commentary
As we explained in the intro, Fantom has had a bit of a tough time lately with Andre Cronje leaving crypto and DeFi.
Cronje - the incarnation of DeFi Degens - had been working very closely with the Fantom Foundation to push their DeFi efforts forward. His "abrupt" departure from Defi/Crypto has rocked the markets a little bit. Both for the protocols he created as well as for the Fantom Foundation he was working with.
This - combined with the Fear, Uncertainty, and Doubt it created - was enough to spur the Fantom Foundation to issue a public statement. Which does help understand it's not nothing, even though it's much less impactful than some initially claimed.
Other than that, Fantom is actually doing pretty well with its "high throughput" EVM-compatible chain "Opera".
From liquid staking, exchange partnerships, and cross-chain bridges, the ecosystem of the Fantom chain is developing.
Whether it is developing fast enough to take a meaningful place next to Ethereum and other Alternative Layer ones is still to be determined. But looking at the trends from the Electric Capital report for 2021, it would look like it does really have a shot. This was the quote: for "midsized and smaller ecosystems (less than 300 developers): Comparing average monthly active developers between December 2020 and December 2021, Terra, ICP, Fantom, and Harmony all 4x'ed their developers in 2021. Both Avalanche and Algorand grew their developers by 3x."
CRV is the governance token of the Curve DAO.
Curve is a decentralized exchange optimized for efficient swaps between 2 assets of the same value. It was launched in early 2020, and will likely go down in the history books as one of those that really helped kick-off the DeFi summer.
It exists because the initial design of Uniswap - the first successful Automated Market Maker (AMM) - was very generic and worked for all types of pairs, but was optimized for none.
Because when trading two assets that have the same price ( for example, USDC (=$1) and UST(=1$) or RenBTC (=1BTC) and wBTC (=1BTC) ), optimizations can be found to offer less slippage & a better deal for liquidity providers.
If you like math, you can find the difference between the Uniswap formula and the StableSwap (Curve) formula here. If you don't like math just know that it works.
Since it started Curve has pretty consistently been one of the top Decentralized Exchanges by volume, offering DeFi adventurers ample liquidity at low fees and slippage.
A key part of the infrastructure behind the AMM is the Curve DAO, which controls Curve (Finance). Curve's native governance token, CRV (an ERC-20 token), which was released in August 2020, governs the DAO.
The number of votes and the time of the vote are both taken into account when weighing votes; earlier time-locked votes are worth more. The token also has a value-capture mechanism to promote certain pools, and a locking mechanism
The CRV token's debut in 2020 sparked a boom in trade, allowing Curve to surpass $1 billion in Total Value Locked (TVL) for the first time.
The DAO is here: https://dao.curve.fi/
The exchange is here: https://curve.fi/
The look and feel will probably remind you of Windows 95 and lead you to assume this is not made for humans, and you'd be partially correct. Humans are better off using 1inch.io or matcha.xyz which will aggregate liquidity and make everything much simpler and nicer to look at, at no extra costs (and even some substantial savings).
Why is CURVE (CRV) whitelisted as an investable asset for Autopilot?
For once, it is not because of the fat protocol thesis!
Curve has been whitelisted since October 2021 but has never actually been held by the Autopilot.
DAO/protocol tokens are a little riskier than Layer one tokens because you need to understand 2 things:
Is there any sort of value capture - now or planned in the future - that allows the DAO token holders to make any money off of holding that asset?
Is there anything else that makes that token worth holding?
And Curve is one of the DAO tokens with the most immediate opportunity for value capture. Because whereas a lot of DAO tokens have the possibility to distribute the treasury or the fees they collect to their tokenholders in the future, many didn't start off with that possibility so as to avoid regulatory scrutiny. So there are quite a few DAO tokens that, in their absolutely immediate form, could be considered as "currently worthless" or "highly speculative".
Besides the basic fact that the token allows you to vote, it actually allows you to lock your tokens to get fees generated by the protocol liquidity pools, but also allows you to promote certain pools and to direct rewards to them. And with that power, came the Curve Wars.
A note on the "Curve Wars" and the larger fight for liquidity
When you supply liquidity to a Curve trading pool (1DAI and 1 USDC, for example), you get a cut of the pool's trading fees. However, as an extra incentive for supplying liquidity to that pool, you will also receive some CRV tokens.
Whenever someone does a trade on Curve, they have to pay an exchange fee, usually 0.03%.
Of that 0.03%, 50% goes to the people who provided liquidity. And the other 50% goes to holders of veCRV.
veCRV means "Vote Escrowed Curve". Those are tokens that are 100% locked and unstranferable and escrowed for voting. Depending on how long you agree to lock your token for, you get a different amount of veCRV.
When it's locked for 4 years you get 1veCRV for each CRV locked. When locked for 1 year you get 0.25 veCRV for each CRV.
Rewards for veCRV are variable and can be found at Curve. It's 8.19% at the time of writing.
On top of that passive income, veCRV will also boost your rewards for providing liquidity.
It's a very good example of tokenomics design since Curve keeps issuing CRV but it is incentivizing people not to sell them and increases the likelihood of seeing them participate in governance.
And one thing you can decide on through governance is which pools are "incentivized" with CRV tokens reward.
The more votes a pool receives, the more CRV LP stakers it will receive, and so the pool will presumably attract more people. As an individual, you don't have much power and you don't really care and you will most likely vote for whatever pools you have your money in. However, as a protocol with a token traded on the Curve AMM, this is huge.
If a protocol launches a stablecoin, it wants to allow traders to trade large amounts of it. And Curve is a very good place for that. That protocol could deposit millions of dollars of stablecoins in the pool so it's really liquid. But if it can acquire veCRV it can vote for the pool to get CRV rewards and therefore incentivize other people to put their own millions of dollars into that new pool which the protocol wants to see take off.
So the votes or veCRV holders are very powerful for protocols that want liquidity for their stablecoins, and that's what started the Curve Wars: protocols started bribing veCRV holders to buy their votes. That's good for CRV and veCRV holders, because it's another source of revenue for them.
If you want to see, in action, how stablecoin protocols are looking at bribing AMMs to get their pools incentivized, take a look at how Terra argued for it, then voted for it:
There are many more interesting little details but just know that the main enabler of the Curve wars is Convex and that it's still very much ongoing, and that is spreading to other AMMs.
This is not investment advice, nor a solicitation. Crypto markets possess a high level of risk, including volatility and regulatory uncertainty. Past performance does not constitute a guarantee of future results in any way. You are solely responsible for doing your own financial, legal, tax, or investment research before taking any actions.
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We thought it might be useful to provide you with some extra background and performance information on a selection of the crypto assets that the Autopilot was holding in August 2021.