Leserve DAO fundamental and tokenomics analysis
What's the project all about? Why is it important? How is it going to gain adoption? Price predictions and more.
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WHAT IS LESERVE DAO?
It is a platform that is building and developing an independent reserve currency (LSRV) on the Terra blockchain. It is inspired by Olympus DAO and by its novel mechanism which gave birth to Defi 2.0.
FUNDAMENTAL ANALYSIS
1. UTILITY:
What is Leserve DAO solving?
Most Defi protocols don’t own their own liquidity, which is provided by the users to earn a yield. The problem is that users have no loyalty with the protocol because they don’t have the proper incentives. So whenever a new protocol appears with a better APR, the users take their liquidity with them (AKA Yield Farming). Of course, this is not healthy for any Defi protocol.
The protocols are then left with the only option of increasing the APR (by increasing issuance of the token —>Inflation —> Bad for token value). Even worse than inflation, users don't usually want to hold these tokens, so they dump them on the market and move on. Token price obviously goes down.
How Leserve DAO will solve this?
By taking the Olympus DAO approach. You can read all about the Defi 2.0 method and the Game Theory behind it right here. If you want me to make a deeper explanation on Defi 2.0, let me know!
Leserve DAO will own its own liquidity by issuing protocol bonds. So if you provide UST, you will get LSRV token at a discount. This way, the UST is locked in the treasury of the DAO and it will own its liquidity. Which it’s important because this enables Leserve to not have to pay high farming rewards. Also, the liquidity is used to back LSRV.
Not just a fork
“While appreciating the underlying mechanisms and functionality of Olympus, being a 1:1 fork on the Terra chain is unfeasible. While Leserve is inspired by Olympus and replicates the mechanism as close as possible to the standards and norms of the Terra blockchain, it is vital to recognise that the two can never be the same.(…) We recognise and acknowledge that the design of Terra is for the protocols to interact with one another, which is why it is our goal to fully leverage the Terra ecosystem by eventually securing strategic partnerships and seeking integrations with other DeFi protocols.”
2. ROADMAP
The devs are saying that the launch is coming VERY soon (probably January 2022). Also, we know that once it is launched, it is on the team’s mind to seek integrations with other protocols and even other blockchains, leveraging the IBC (Inter-Blockchain Communication) of Cosmos.
Governance Roadmap:
“We believe that it will be feasible and viable for Leserve to achieve full DAO governance, 12 months after launch and stabilisation of the protocol.”
Leserve’s governance will be based upon 3 councils, judiciary and the general assembly.
I am not going to describe the governance proposition in full, but it’s really innovative. You can read all about it here.
3. TEAM
The Leserve Core Team consists of seasoned software engineers, business leaders, designers, and university academics with highly profound experiences in founding organizations, researching, and engineering.
We do not know their names. They are active in the Discord community and have held some AMAs.
4. PARTNERS
Leserve is going to do partnerships post-launch. Before the launch, they are focused on fully organic reach and growth.
5. COMPETITION
There is NO actual competition right now within the Terra ecosystem. Outside Terra, the biggest one of course is Olympus DAO which has a market cap of 2.6B USD.
6. SOCIAL MEDIA
For a product that has not even launched, it has a very impressive community.
Discord channel: 23k members. Impressive.
Twitter: 18.7k followers
Medium: excellent published articles and 1k Followers.
7. SECURITY
The team is using a multisig wallet.
Each core team member is using a hardware wallet for managing the multisig.
Code-reviews are performed on every part of the code.
Leserve Contracts implement a special “freezable” trait, that allows the protocol to be frozen, should there be any considerable security threat appearing.
All on-chain code and the GUIs will be open-sourced. The community can verify that what is deployed on the chain corresponds with what is on Github.
8. AUDITS
They haven’t been audited, although they say it will happen. I am personally reluctant to invest in projects that haven’t been audited due to smart contract risk, so this is a red flag for me.
Maybe an integration with an insurance protocol would be great in absence of an audit.
TOKENOMICS
1. TOKEN USAGE
The whole point about the project is creating an independent reserve currency: $LSRV. The idea is that you stake it to get high APY, and get sLSRV.
Also it is used for governance, but it is not at a 1:1 ratio. Meaning, you don’t always get 1 vote for 1 LSRV. It is designed in a way that whales don’t manipulate and hijack the project. The voting power will be scaled down by some function.
sLSRV holders will be also able to:
take a self-repaying loan against the fraction of their sLSRV holdings.
be eligible to receive discounts on the services of the Leserve treasury such as flashloans, self-repaying loans, buying out locked assets and other services that Leserve provides at the time of their holdings.
2. SUPPLY
Funding: Leserve is resorting to the very same model utilised by Olympus DAO. They are issuing pLSRV tokens.
What is pLSRV? pLSRV is a precursor derivative of LSRV. It inherently gives the holder of the token the option to mint LSRV by burning pLSRV and providing the intrinsic value of the LSRV. E.g. An investor provides 1 UST and 1 pLSRV to mint 1 LSRV. The pLSRV model successfully achieves overall alignment on incentives among all stakeholders and parties involved.
Leserve is self-funded and generally does not seek venture capital.
The capital allocation from pLSRV sale which is normally planned for VCs will be utilised as the funding capital of the DAO. This will allow the DAO to be in a position of power and safety from the point of its inception.
3. PRICE PREDICTIONS
It is hard to estimate a price because there is not a defined token supply, so we are going to estimate a possible Market Cap.
Olympus DAO MC: 2.8B
Treasury assets: 675M
Ratio Olympus MC/Treasury: 4.15
Wonderland MC: 2B
Treasury assets: 812M
Ratio Wonderland MC/Treasury: 2.46
We are now assuming that a Leserve DAO launches and it is able to raise 100M to back LSRV. So, if it has 100M in Treasury Assets and we see that the Ratio MC/Treasury of the biggest protocols is between 2.46 and 4.15, I am going to take an assumption and say that the Ratio for Leserve will be 2.5.
That would put Leserve Market Cap at 250M
I would beware if the price of LSRV really spikes after launch. Look at $OHM and $TIME.
So if the price of LSRV really spikes, I am going to be taking profits. The good thing about investing in LSRV is the high APY, not the price itself. So the ultimate goal is that LSRV price stays flat while earning somewhere between 10,000% and 100,000% APY.
FINAL THOUGHTS
From an investor’s perspective, I think this will be a good buy. Why?
As there were no VC investing at a seed stage, this is an opportunity to actually be a VC. This is the strongest thing about investing in Leserve IMO.
Terra ecosystem is growing at an enormous pace and will continue to grow with the adoption of UST. Every major blockchain has an Olympus fork, so it’s only reasonable that Terra has one of its own.
Continuing with the last point, Leserve is NOT just a fork. They have created great incentives to be hold $LSRV.
The launch will be through a LBP (probably on Astroport), which is designed to mess up bots and protect the real user.
The community is great and it’s only getting bigger and better. I have been in the Discord for a couple of weeks and the discussions show that it is a team worth investing in.
The team has a clear understanding that not only do you need a good product, but also you need marketing to grow. This article explains their stance on the importance of community & growth.
If you don’t want to miss the launch, I suggest following the DAO on Twitter and join the Discord channel.
Some cons:
Smart contract risk: This project is not a fork of OHM, it has been fully re-written to fit within the Terra blockchain. So it does not have the smart contract security of OHM, which has been both audited and time-tested. Taken also that an audit hasn’t been done yet, this is something to consider. However, according to the Team, the Code will be audited by an external company:
Before launch
Before major upgrades to the protocol
At least once a year
Defi 2.0 protocols are still quite new. OHM was the first one and it has less than a year in the market. It is still left to see if Defi 2.0 is going to be sustainable long-term.
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Twitter: @JuampiAranovich
Did I miss something? Any feedback is also welcome, both positive and negative.