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Value capture for PICKLE



(Path with Poplars, Van Gogh)

In the field of DeFi, people have racked their brains in order to find a valuation model. Even so, there is no universally recognized valuation standard, and there is no truly effective general method, and everything is constantly being explored.

One of the methods is that people start to compare the amount of locked assets of the agreement with the market value, so as to obtain a value, which is used to measure whether the value of a certain DeFi agreement is overvalued or undervalued. This method believes that if the amount of assets locked in the agreement is larger and its market value is relatively low, then its value may be underestimated.

Of course, this indicator is not absolutely effective, it is only a relative measurement value, or a side reference indicator. Because valuation is a very complicated matter, even if the same amount of assets is locked, the ability of protocol tokens to capture value is very different. There is currently no universal universal valuation indicator.

PeckShield: 1,800 ETH of Pickle Finance’s stolen funds in November last year were mixed through Tornado Cash: On May 8, according to PeckShield’s monitoring, 1,800 ETH of the stolen funds of the DeFi revenue aggregation protocol Pickle Finance passed Tornado Cash in the past 10 hours Cash completes currency mixing. In November 2021, PickleFinance was attacked by an attacker who stole funds through a fake jar. The attacker deployed the fake jar with the same interface as the original, and exchanged funds between the fake jar and the real cDAI jar, and stole deposits worth 20 million U.S. dollars . [2022/5/8 2:58:25]

In addition, the development of DeFi is still very early, and the changes are also rapid. Different protocols are ebb and flow. Today's scale is bright, and tomorrow may be dim. In extreme cases, a black swan can bring an agreement back to pre-liberation in an instant. Therefore, these indicators are only a relative standard for everyone to use as a reference, and cannot be regarded as an absolutely effective tool for valuation. This needs to be done with great care in practice.

Pickle Finance’s new proposal proposes to fix the release amount of PICKLE at 0.1 PICKLE per block: According to official news, Pickle Finance initiated the PIP-32 proposal, suggesting that the release amount of PICKLE be fixed at 0.1 PICKLE per block, and will not be reset until DILL is launched. Consider long-term release plans. [2021/3/16 18:49:58]

As of the writing of Blue Fox Notes, according to statistics from DeFipulse, the amount of assets locked in the entire DeFi field is about 10 billion U.S. dollars. The current overall market value of DeFi, according to Coingecko’s statistics, is about 13.1 billion U.S. dollars. According to this data, the locked asset volume/market value ratio of the entire DeFi field is about 0.76.

Currently, the amount of assets locked in Pickle is 113 million US dollars, which is about 1% of the entire DeFi field. According to a simple and crude comparison, based on the average value of DeFi’s locked assets/market value, Picke’s imaginary market value can reach approximately US$148 million, which is US$113 million/0.76.

Haechi: The previously audited smart contracts did not contain Pickle Finance attack vulnerability code: In response to the Pickle Finance attack, the audit company Haechi clarified that we conducted an audit in October, but the vulnerability exploited by the attacker occurred in a newly created smart contract , not in smart contracts subject to security audits. The code related to this vulnerability attack is "swapExactJarForJar" in "controller-v4.sol"; while the previous security audit was for "controller-v3.sol" and did not include "swapExactJarForJar". In the near future, Haechi will publish an analysis article on the Pickle Finance attack incident. [2020/11/22 21:40:48]

Interestingly, the current actual market value of Pickle is only $15.82 million, and its locked assets/market value ratio reaches 7.1, far exceeding the current average value of DeFi. If compared with YFI, the leader of DeFi, YFI's locked assets/market value is about 1.8, which is still far lower than Pickle.

White hat hacker: Pickle Finance attackers steal funds by forging jars: According to news on November 22, regarding Pickle Finance’s loss of nearly $20 million due to a vulnerability, Emiliano Bonassi, a white hat hacker and co-founder of DeFi Italy, said that the attacker deployed An "evil jar", which is a smart contract that has the same interface as a traditional jar, but does bad things. The attacker then swapped funds between his "evil jar" and the real cDAI jar, stealing $20 million worth of deposits. (Cointelegraph) [2020/11/22 21:38:31]

From this perspective, many users lock their assets in Pickle, especially in PJar, to obtain mining income through it, but the PICKLE token itself does not capture the corresponding value. As for the reason, it depends on people's behavior in the market and their perception of its value. It may be due to the selling pressure of mining, it may be due to security audits, or it may be due to people's perception of the project. .....

The Pickle Finance community has elected three multi-signature holders: The Pickle Finance official just tweeted that a major governance upgrade is underway. According to the official, three community members have become the key holders of the multi-signature wallet for governance and finance, namely jjdubs, Peachy and CeloProtocol. In addition, the official also removed a core developer from both wallets. Multi-signature now requires 3/6 signatures. The official stated that more members are expected to join the multi-sig to help Pickle Finance transition to a community-run DAO. [2020/10/27]

These aspects are being addressed by the Pickle community. For example, it is embarking on an audit, is reducing its inflation rate, and is designing a mechanism for locking PICKLE to obtain pJar benefits, etc. However, these are only one aspect of the token mechanism. The fundamental value supporting PICKLE lies in the scale of its locked assets and the resulting fee income. This is the key to its future success.

From the perspective of value, whether the PICKLE token is overvalued or undervalued depends on its ability to capture value. So, where does the value of PICKLE come from?

First, let's review what Pickle does? The goal of Pickle is to help de-anchored stablecoins keep approaching the anchor price. It uses Pickle tokens to reward people for keeping the stablecoin in line with its anchor price.

However, for the PICKLE token itself, the above process does not capture much value. Currently the value of PICKLE tokens is mainly derived from PickleJar fees. PJar is similar to YFI's Yvault, which helps users earn profits through its mining strategy. While helping users to earn income, when users want to withdraw from pJar, they need to pay 0.5% fee. This is similar to the operation mode of YFI's yVault.

Therefore, from this perspective, the higher the amount of assets locked in PickleJar, the more fees Pickle can capture. Part of the fees captured will be distributed to holders of PICKLE tokens, and this part of fees is the key to supporting the value of PICKLE.

At present, Pickle’s Pjar has four aggregated mining pools, pJar0.69a, pJar0.69b, pJar 0.69c, and pJar 0, which are close to locking in funds of 100 million US dollars. Among them, pJar0.69 a is the LP token of DAI/ETH deposited in Uniswap to mine UNI, and then sell to earn more DAI/ETH LP tokens. The current APY is 26.95%; among them, pJar0.69 b is the deposit The USDC/ETH LP token in Uniswap mines UNI, and then sells to earn more DAI/ETHLP tokens. The current APY is 21.88%; where pJar0.69 c is the LP token of USDT/ETH deposited in Uniswap Coin mining UNI, and then sell to earn more USDT/ETH LP tokens, the current APY is 23.56%; PJar 0 is to deposit sCRV to earn more sCRV, the current APY is 9.28%.

(pJar of PICKLE)

In addition to the above four pools, Pickle's PIP9 proposal plans to introduce Uniswap's wBTC/ETH LP tokens into pJar to participate in aggregate mining.

Judging from Pickle's plan, it will continue to introduce more aggregated mining pools to capture more fees.

Current users cannot obtain direct benefits by holding PICKLE tokens. On September 28, pickle's PIP 8 proposal was approved by the community. The PIP 8 proposal allows users to stake their PICKLE tokens and earn 4.5% on PickleJar.

(PIP 8 proposal by PICKLE)

Once PIP 8 is implemented, it will lock a part of PICKLE tokens, and the locked amount will depend on its rate of return. High returns will attract a larger PICKLE locked amount, which will also affect the PICKLE/ETH liquidity mining on Uniswap have an impact. Since PICKLE locks can obtain corresponding fee income, this will reduce the selling pressure of PICKLE in the market, and at the same time increase the demand for PICKLE.

In the original PICKLE distribution plan, it adopted a weekly reward halving model. In the first week, each block rewards 10 PICKLE, in the second week, each block rewards 5 PICKLE, and so on, until finally each block rewards 1 PICKLE.

However, this token distribution mechanism was changed in the later PIP 5 proposal. In the new plan, from the 6th week to the 52nd week, the PICKLE token reward will be reduced at a rate of 10%, that is, the 7th week will be 10% less than the 6th week’s PICKLE reward, and so on. After week 52, PICKLE will maintain a static distribution mechanism, approximately 329 PICKLE per week. According to this distribution model, there will be more than 1.3 million PICKLEs in one year (currently 873,849.855), so the upper limit of the annualized inflation rate is 1.29%.


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