As per the last monthly snapshot of the portfolio we looked at, the Autopilot was holding: MKR: 30.2%; TRX: 30.1%; BNB: 30.1%; KLAY: 8.2%; GALA: 1.2%; BTC: 0.1%

To complement our monthly "Under The Hood" where we go over what happened in Crypto and the Autopilot, we offer a deeper dive into background and performance of a selection of the crypto assets that Autopilot was holding.
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TRON (TRX)

Description

TRON, started in 2017, is a smart contract platform for the creation and deployment of decentralized applications (dApps) that originated in China. The project was started to give digital content creators full ownership rights. The main purpose is to assist content creators (who, in Web2, only receive a small portion of the income they generate) and enable them by providing more rewards.

It uses a delegated Proof-of-Stake (DPoS) consensus mechanism with a relatively small number of validators (SuperNodes or "Super Representative"), which allows for increases in performance but does reduce the decentralization and censorship resistance aspects. Tron is the brainchild of notorious - and controversial - crypto celebrity Justin Sun.

In 2018 Tron purchased BitTorrent - the file sharing service - to extend its products.

Token

100 billion tokens were initially created during the ICO, 44% of which were kept by the founders and the project.

Initially planned to have a fixed supply, it then moved to something more dynamic with issuance and burning supply through usage, a little like Ethereum has been doing since EIP 1559.

So, in addition to its genesis supply of 100 billion TRX, new tokens are minted as an incentive reward for essential on-chain maintenance such as block validation and community voting, which is approximately 1.8% of total circulation. On the offsetting side, the amount of token burn is equivalent to the gross fees generated from on-chain transactions. Consequently, the net supply of TRX depends on the RewardsBurn dynamics daily. It's worth noting that TRX token supply became negative on multiple occasions, a deflationary scenario.

For more info, here is a piece on the Tron Ecosystem & chain written by the TRON Research team for the purpose of issuing TRON ETFs : https://coin.top/pdf/TRON_Crypto%20ETFs%200917.pdf

Why is TRON (TRX) whitelisted as an investable asset for Autopilot?

Per the "fat protocol thesis", and our repeated agreement with that thesis, we elected to whitelist TRX for the Autopilot the same way we have whitelisted Ethereum, Avalanche, or Solana.

It was whitelisted and became investable from the beginning (2019). It has been held at various times. Recently, it has been held since December 2021 and has overwhelmingly contributed positively to the Bitcoin performance of the portfolio, even if the € performance - like the rest of the market - hasn't really been positive. This is in line with the BTC and Euro price chart since Dec 2021 which can be found below

As of June 13, 2022, TRON has however been removed from the Autopilot's whitelist.

Indeed, USDD - the stablecoin - has started losing its peg and if the episode around the LUNA/UST is anything to go by, it will likely have a negative impact on the price of TRON (TRX) since it is the most important asset collateralizing the stablecoin.

In addition, the APY for the USDD was briefly moved from 30% to 10% (after apparently resuming to 30%) and that instability is likely to lead to capital flight.

The bottom line is that in this volatile market environment it seemed more prudent to stay away from another stablecoin experiment.

TRON (TRX) Market commentary

Tron has had the light shown on the project again recently thanks to several "newsworthy" announcements.

Chief amongst them is the announcement of the USDD algorithmic stablecoin. Modeled after Terra's UST (which, for those who forgot, crashed and burned mid-May 2022), it seeks to offer a stablecoin that keeps its price pegged to the US Dollar mostly through the use of an algorithm, incentives for traders and market makers, and some "backing".

The complete met-down of Terra did not deter the project from launching and offering eye-watering APY on the stablecoin (30%), which currently has a market capitalization of €656,804,055. It would appear, however, that they are marketing it as "over-collateralized" these days, likely to reassure people that they aren't exactly like Terra. Some of that "capitalization" is, however, in TRX so there is some reflexivity there too.

The TRON DAO that manages the reserves then whitelisted Alameda Research and Poloniex as partners. Fireblocks - the industry's dominant custody infrastructure provider - also added support for TRON which makes it easier for institutions to participate and is likely to enable more capital to flow into the ecosystem.

Lastly, Tron has recently made the headlines for the amount of USDT on the chain, which surpasses the supply on Ethereum. USDT is Tether's usd-backed stablecoin. It's not immune from controversy either but has weathered the recent storms quite well.

Binance Coin (BNB)

Description

A peculiar asset in the crypto ecosystem, BNB is both the ICO token (which was conducted on Ethereum and then moved to its own chain) of the Binance exchange (centralized exchange, or CEX) and the utility token of the Binance Smart Chain (BSC); recently renamed "BNB Chain".

The BNB Chain is itself a little peculiar since it isn't quite as decentralized as the alternatives, favouring throughput, low fees, and ease of use over decentralization.

Token

The BNB token can be used to pay fees at Binance CEX and its price was very correlated to the success of the CEX until they switched to "Auto-burn" (initially through buy-back and burn which recently switched to "auto-burn").

With the new Auto-Burn & the implementation of BEP95 there are now new modalities for burning BNB, and Auto-Burn will stop when the supply hits 100 million.

The economics of the asset are therefore a hybrid of an exchange token (like FTX's FTT) and a layer-1 chain (BNB Chain, which is like Ethereum or Solana). The Auto-burn, based in part on the price of BNB, is outright weird.

As with Layer 1 chains, BNB can be used to pay for transaction fees on the BSC. BNB is also necessary to participate in the decentralized on-chain governance of BSC/BNB chain, since Binance does not "control or operate" BSC/BNB Chain -- even if they are the largest single contributor.

Like an exchange token, it can be used to pay for exchange fees on Binance Exchange, as well as other "fun" staking things put in place by Binance on the CEX.

It does however remain very different in the decentralization aspect than Ethereum is. BNB Chain operates with a small pre-selected validator set. Binance Smart Chain relies on a system of 21 validators with Proof of Staked Authority (PoSA) consensus that can support short block time and lower fees. This means that it requires some very beefy hardware. Making it into the top 21 would currently require about 758,865 BNB, or over USD 150 million at current prices. So it's not exactly available to everyone from a laptop.

BNB Chain is comprised of:

1. BNB Beacon Chain (previously Binance Chain) - BNB Chain Governance (Staking, Voting)

2. BNB Smart Chain (BSC) (previously Binance Smart Chain) - EVM compatible, consensus layers, and with hubs to multi-chains

Why is BNB whitelisted as an investable asset for Autopilot?

BNB is whitelisted because of its "layer-1" like characteristics.

In line with the "fat protocol thesis", and our sustained agreement with that thesis, we elected to whitelist BNB for the Autopilot the same way we have whitelisted Ethereum, Avalanche, or Solana.

BNB has been whitelisted since the very beginning of the creation of the Autopilot Universe (June 2019). It was held mostly through the first half of 2021 and has made an appearance again every month of this year aside from March.

BNB Market commentary

In 2022, BNB held relatively well against Bitcoin and only lost 10% of its value in Bitcoin while sometimes managing to beat BTC over short timeframes.

Overall, in this market, BNB has been doing pretty well, keeping in mind that virtually no large crypto asset has been doing better than Bitcoin over the past 90 days.

One thing which might worry CZ and Binance a little bit in the future is the current probe by the USA Securities and Exchange Commission (SEC) into the BNB ICO. The SEC might end up thinking that the ICO was the unregistered sale of a security, which would make Binance liable for a hefty fine, and likely also a long trial since the SEC seem less inclined to settle out of court these days.

This is likely why Binance moved from the original burn to the "auto-burn" mechanism. Indeed, the token burn based on fees accumulated by the Binance CEX could be compared to a corporate share buyback where profits are used to purchase assets. This linked the value of BNB to the efforts of a third party, which risks it being classified as a security based on U.S. regulations. If it were classified as a security, it would make BNB an unregistered security and would prevent it from being traded in the U.S.

Regardless of USA problems, BNB, and Binance, are doing pretty well for now.

Maker (MKR)

Description

Born in 2014 and lovingly nicknamed "the grandfather of Decentralized Finance" (DeFi), Maker is a decentralized lending platform that enables over-collateralized loans by locking crypto (ETH, wBTC, Stables, liquidity positions,...) and minting Dai. To date, it is still the second-largest DeFi protocol by market capitalization after AAVE. It is the first by "total value locked" (TVL). That has fluctuated over time but in those times of unrest and flight to safety, Maker is seen as robust.

Dai is a stablecoin pegged to the US dollar. Its stability is achieved through collateralized debt positions, feedback mechanisms, and incentives for external actors. Once generated, Dai is uncensorable and fairly unstoppable, which makes it an interesting stable asset.

Token

The Maker DAO has two native tokens: DAI and MKR.

DAI is the stablecoin people can borrow, as stated above.

MRK is utilized for platform governance, allowing holders to vote on things like the stability fee, debt ceiling, forms of collateral allowed, the Dai Savings Rate, and more. MKR is also used in the Surplus Auction to purchase extra Dai from collateral auctions and to pay for stability fee payments. When the auction is over, the protocol burns the MKR, resulting in a decrease in supply. If there is a shortage of Dai due to under-collateralization of loans, a Debt Auction will be held to raise more Dai by printing MKR, hence increasing supply.

MKR is therefore there to capture value from borrowing and DAI minting and to govern the parameters of such activities. It also serves as an "insurance" of last resort since MKR holders are diluted to make the protocol's finances whole. It is therefore in the interest of the token holders to govern responsibly..

Why is Maker (MKR) whitelisted as an investable asset for Autopilot?

In short, there is no reason to exclude MKR.

The project is solid and has a strong track record. It has weathered a couple of storms, and crypto winters, well and has always come ahead. The tokenomics are strong and the value capture understandable.

It is one of the most fundamental building blocks of today's Decentralized Finance and while many have sought to emulate its design, none have thus far managed to reproduce its network effects or the utility of DAI.

MKR has been whitelisted since the beginning of the Autopilot and has never left the investable universe. It was held at some time or other all through the first 3 quarters of 2021 and reappeared in the portfolio in May of 2022. While by far not a best performer, it has helped maintain the value of the portfolio against Bitcoin most of the months it was held.

It is no surprise that, in these volatile times, the Crypto Autopilot Algorithm chooses that comforting asset to move to.

Maker (MKR) Market Commentary

After the collapse of Terra's Luna and UST, Maker has been seen - again - as the sensible way of issuing stablecoins.

But while Maker has been a staple of DeFi since even before DeFi was a thing, it is not a fossilized protocol either.

It has a big team actively working on its development and is slowly but surely charting a path toward bringing more and more Real-World Assets (RWA) on chain (more on the DeFiant).

Maker has gone through many changes, going from a somewhat centralized model to a full DAO model. But it would appear that some - including MakerDAO founder, Rune Christensen - believe that the DAO is in need of more changes.

Christensen argues that the DAO has become too complex and too expensive to manage (with 115 contributors, it's currently operating at a $9.4M annual loss). He's made an "endgame" plan to change things.

Time will tell what Maker looks like going forward, but it is likely to remain one of the pillars of DeFi for a little bit longer.