Polycub is a new animal. This is a point that we have to keep driving home. In these articles, we try to convey that idea. Khal is doing it with his posts on Twitter and Leofinance as well the videos he makes. There are others who are also following the same it.
There are many layers to Polycub. We also have a number of phases that we will be going through. At this moment, we are still in the distribution phase, aka Defi 1.0. This is no different than most other yield farming projects we saw for the last couple years.
At some point here, in the next couple months, we are going to be in the DeFi 2.0 stage. That is the time when shifts will take place. For that reason, we will have to realign our focus.
In this article we will cover what is taking place and how things are going to change.
POLYCUB/xPOLYCUB Ratio
At the moment, the only thing that matters is the PC/xPC ratio. The USD value is of no consequence now for long-term holders.
The reason why that is the area to focus attention upon is because we are in the period of high emissions. Even now, after 3 "halvings", we are still see 2 POLYCUB per block. This will decrease in 4 days, dropping to 1 per block. After that, it halves each month going forward.
During this period, the protocol is doing no buying of the POLYCUB. The emission rate is high enough where the xPOLYCUB, farms, and kingdoms can be paid out. This will not always be the case.
The ratio is what tells us how much POLYCUB is entering the xPOLYCUB contract along with the amount produced. Through some simple mathematics, we can determine the potential amount of xPOLYCUB that can be generated (right now 393,765).
We see a pace of distribution which is still too fast for the market. The price of POLCYUB, in USD, keeps dropping. That is why we ignore the USD factor. It is logical that it will keep decreasing.
Due to the 50% penalty on claims, the amount of POLYCUB going into the contract is steady. This shows there are people farming rewards, and cashing out as soon as they can. There is no waiting the 90 days. The yield farmers (DeFi 1.0) are out in force.
Keep in mind, nothing about DeFi 2.0 is implemented yet.
DeFi 2.0 Changes Things
When we get to the next few phases, we need to then start to realize who things are going to change.
The next evolution is going to be bonding. This is not novel since other platforms have it. At this point, we are still focusing upon the ratio since POLYCUB is still the criteria. People are going to be scalping a few percent off the bonding moves they make, something that is paid in POLYCUB. This puts more on the market, some of which will end back in the xPOLYCUB contract. Some, however, could end up being dumped.
After that we will see the collateralization. This is where the USD starts to enter the picture. At that time, hopefully in 4-6 weeks, we will see people putting the value of their xPOLYCUB to use, at least a portion of it. This is going to depend upon the value in USD. The higher the USD, the better for the platform.
Of course, it might now be moving in an upward direction at that point. It is hard to tell exactly when this will bottom out.
One thing we do know, the protocol is going to start buying POLYCUB once the emission rate slows down. It is estimated this could come in June or July. Once the rate is slow enough, the protocol is going to have to distribute the returns for the different farms and kingdoms. Here is where we see the buy pressure steps in for certain.
When the emission rate is a thousands POLYCUB per week, the denomination is not relevant. At that point in time, it will all be USD focused. How much USD is available to purchase POLYCUB. The emission will be so small it is not significant. Hence the shift in our focus is necessary.
In Conclusion
At this moment, the emission is such that the POLYCUB in the xPOLYCUB contract is moving higher at a fairly rapid rate. This is going to keep slowing as the pace of distribution starts to diminish.
Since we have high distribution, the USD price of POLYCUB is heading down. This is occurring at a speed that is pulling down the USD price of xPOLYCUB. However, the system is designed to keep the ratio increasing at a pace that offsets it somewhat.
Ultimately, we will get to the point where the amount of POLYCUB put into the contract on a daily basis is minimal. The value of that, in USD, however, will be much higher. We are going to see the protocol garnering value in USD, something that it is going to have to spend on POLYCUB.
Without much of it out there, the price in USD has no direction to go but up. This is going to be driven, in large part, by what is bonded over the next couple months.
Just consider what things look like if the protocol has a few million in it yielding 30%. When there is only a couple thousands POLYCUB issues a month, where is all that money going? The answer it will have to buy POLYCUB on the open market.
Again, simple math tells us it won't take much in the protocol to make this a highly successful venture.
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