Welcome to the case study of $YES, the first ERC20 token powered by Baseline. YES was purposely designed to demonstrate the capabilities of Baseline’s up-only technology. In this article, we'll get into pivotal events that shaped its journey, helping to paint a better picture of how Baseline is revolutionizing token launches and reach maturity.
Study Baseline, study YES
Before we explain what makes Baseline tick, a primer:
Above is what a Baseline-powered chart looks like. YES was launched with wETH as a pairing asset. The candles at the top represent the market price, typically seen on platforms like Dexscreener or Coingecko, where tokens are traded.
The green line, known as the BLV (Baseline Value), represents all the intrinsic value accumulated by YES through volumes and fees, stored on Baseline’s smart contracts. Trading volume can be viewed at the bottom of the chart.
The first candle
On March 2nd, we successfully completed the IBLV (initial baseline value) event with nearly 100% of the spots filled in an smart contract with 311 ETH (~$1m). The contract then allocated the funds to the floor range, establishing the initial price of $YES at $1.9.
The growth of the floor slowed down around 6:00~12:00, but because the volume remained consistent, the premium, which is the distance between the market price and the BLV, remained relatively the same.
When we closely examine the chart, it becomes evident that the floor grows faster as the volume increases. However, the floor does not decrease when the volume is lower. In fact, BLV growth comes from selling tokens at premium, the greater the premium, the greater the BLV growth.
YES launched with a conservative liquidity profile: the discovery range was configured to get progressively thicker as the price rose. On its first day, the BLV grew by 50%. Because the BLV grew, the borrowing capacity did too. Holders were able to access even more wETH and used that capital to purchase more YES.
Timing is everything
Baseline has a decentralized Credit Facility that allows YES holders to borrow wETH by using their YES as collateral. Since Baseline guarantees an intrinsic value for each token, the protocol allows holders to borrow this value at a high loan-to-backing value, for a small fee, and with no risk of liquidation.
Below is an oversimplified example of looping efficiency at both a 50% and a 5% premium. Looping is a form of max leveraging by borrowing ETH to purchase more YES, and repeat that process. For the sake of simplicity, this infographic assumes 1 YES = 1 ETH, and interest costs are not taken into account.
As you can see, a borrower that loops YES at a 50% premium can increase its position to 1.88x within 3 loops. If that same borrower would loop their YES at a 5% premium, his position size would be over 3.11x
Buy low sell high
This seems to be the most logical thing to do, but it’s easier said than done. Most of the time, this strategy can be difficult as prices reflect emotions and psychology, then exaggerated and lead to over-estimation that manifest as volatility. However, when a trader looks at a Baseline chart, trading becomes much easier because emotions are measured when there’s a safety net (BLV), they know the downside is capped.
Fast forward to March 15th, YES’ BLV was sitting comfortably at a fixed price, and the Credit Facility was as healthy as ever. As the sell-off moved price toward BLV price, traders felt comfortable enough to jump back into YES, knowing their max downside was limited.
Around 18:00 on the 19th, something really interesting happened. The price moved towards the BLV - someone recognized it was a good time to accumulate more YES, re-entered and immediately started looping. Shortly after that, the BLV bumped and the premium increased.
With traditional lending markets, holders looking to lever up are exposed to liquidations, volatile interest rates, and lack of liquidity. With YES and its isolated lending market this is not the case. Holders can always access the ETH from the BLV. Therefore, the closer the price is to the BLV, the lower their maximum downside is. This is why we saw more people borrowing as YES got closer to the BLV. The closer the price is to the BLV, the more efficient loops become.
A Successful Dump
YES v1 was live for a month. During this time, we continued building v2 and Baseline Exchange as we saw consistent volume and a rising floor, maintaining a ~30% premium. On March 30th, we conducted a whitehat operation where we secured the premium and provided holders with the option to migrate their YES to V2. This pivotal moment witnessed a significant price dip followed by a substantial floor bump on the chart. It conveyed a powerful message because even though we intentionally "rugged" the protocol, the price never dropped below BLV, showcasing its resilience and the capabilities of Baseline. Baseline Tokens are unruggable.
This is all possible because 100% of supply was deployed on Blast’s native DEX, Thruster’s v3 pool, to create and reshuffle concentrated liquidity positions at launch. All the tokens are kept on-chain by the protocol and used to protect their value forever.
Current state of YES
We are currently in the middle of the migration. Any YES bought between now til we launch YES v2 will be “stuck” at BLV so please wait until YESv2 launch to accumulate YES. We will be back in Q2, 2024!
What’s coming
The automated market making system we implemented on YES is flexible and designed to complement any ERC20 token. We believe every token should have a floor value like YES.
In the next few months, alongside product integrations, we are going to help onboard projects onto Baseline Exchange, we will spend a lot of time and effort assist in designing customized liquidity structures tailored to project needs. We can collaborate with projects offering staking rewards, emissions, a strong meme, or even migrating pre-existing tokens. We will assist projects in adjusting parameters to align with their protocol's nature. For instance, memecoins could be designed to be more volatile with more frequent BLV bumps.
What we’re most bullish about is we are going to offer existing token migration. We'd love to see builders who share our values and genuinely aim to make a meaningful impact in this space, converting their ERC20s into a Baseline token. This allows them to focus on building their product without worrying about token price. We understand this is not an easy decision to make so don’t hesitate to talk to us even if you are just flirting with the idea, we will do our best to help.
My name is Boo, if you like what we are building, feel free to reach out to me on TG @basedboo, I'd love to connect with you!
See ya next time ;)