Lowered emissions and the ETH 10k Marathon? An update on 0xAcid . - by thade
Overview
Its been 2 weeks since our first Alpha Report on 0xAcid Protocol and approaching the end of the third week since the launch of $ACID. Starting on March 31st, the esACID emissions will go down to 500 esACID per day. In this report I wanted to go over how 0xAcid has progressed, the ETH 10k Marathon proposal, concerns, and what I’d like to see implemented in the future to keep the protocol sustainable!
Market Update
$ACID at the time or writing this article is at $927. If I remember correctly, when we wrote the first Alpha Report, $ACID was sitting around the $900-$1k area. It’s held up well considering the high esACID emissions and short linear vesting period. A good reason why its an enticing buy when it dips to lower prices is because of the real yield paid to $ACID lockers. Lockers are currently enjoying an 11.4% - 29.4% APR paid in wstETH based on how long they lock their tokens. 1 month lock receiving the lower, 12 months receiving the higher APR.
APR for staking to earn esACID is still relatively high as well at 1,601% - 4,804%, so there is still a good farming opportunity. With esACID emissions being cut in half from here starting tomorrow, the APR should be cut in half as well. Hopefully as 0xAcid grows and gains more holders, the APR for esACID will significantly lower and more holders will opt in to locking their $ACID to yield wstETH.
Speaking of which, there is over 2,500 more $ACID locked and earning wstETH since our first Alpha Report. On the flipside, there are obviously more $ACID tokens circulating due to high esACID emissions and a short vesting period. This number is the amount of tokens that are not staked or locked.
Bonds have been doing well for 0xAcid. Since the last Alpha Report, 0xAcid have sold 754.36 ETH (854.36 ETH total) worth of $ACID bonds. $ACID bonds can be purchased at a discounted price using ETH or wstETH. The buyer gives 0xAcid Protocol ETH to apply to different strategies. In return the buyer receives discounted $ACID that is linearly vested over 24 hours.
Lending hasn’t rolled out yet but should be coming in Q2 of 2023. When lending goes live, expect degens to borrow and loop their wstETH. Since the liquidity for $ACID is pretty low, degen carefully. Liquidations would help with burning $ACID supply, though.
The ETH 10k Marathon Proposal (Passed)
To summarize their Substack article - 0xAcid is aiming for a $10,000 valuation per $ETH token. When ETH inevitably (…right?) hits $10k, 0xAcid Protocol will liquidate their treasury and all assets will be distributed based on each wallet’s $ACID holding ratio. For example, if you own 1% of the $ACID token supply when ETH hits $10k then you’re entitled to 1% of the treasury. It also means you’re a whale.
They compare this to a marathon as your goal and best strategy, if you’re in this for the long term, is to lock your $ACID, enjoy the wstETH yield, and continuously vest your esACID to compound and lock your $ACID. By doing so, you’re maintaining your share of the treasury, and also increasing your share as people exit.
My thoughts on this are mixed. Part of me wants to see the team continue building even past $10k ETH, but who knows how long that will take? If $ETH does finally hit $10k, it will be cool to see the diamond hand token lockers get paid out a fat percentage of the treasury.
Thade’s thoughts..
We’re now getting into the part of the article where I talk about my opinions, concerns, and what I’d like to see in the future for sustainability. As it stands right now, there is a great farming and real yield opportunity due to high emissions, a short vesting period, and flexible lock durations. Obviously not sustainable long term in it’s current state as the price will always be suppressed by farmers being able to dump their tokens. On the flipside, if you’re locked into the 10k Marathon, you want them to continue dumping so your share of the treasury grows.
We’ll have to see how the next few weeks play out with the ETH Shanghai upgrade coming up. Hopefully 0xAcid is able to attract more holders and allow the APR for esACID to reduce naturally, but here is what I’d like to see implemented in the future.
In my opinion, it will be hard to sustain a healthy protocol if APR’s and emissions stay high. In the future I’d like to see mechanics similar to $GRAIL and xGRAIL. Its ok for esACID to be farmed, but with high emissions there needs to be a good burn mechanism. Instead of 30 day vesting, I’d like to see flexible vesting periods where shorter durations equal less esACID converted to $ACID, and the remaining tokens that weren’t vested get burned.
For example, you’d be able to vest your esACID for a minimum of 15 days and receive a 0.5:1 esACID:ACID conversion. The other 0.5 ACID will be burned if you choose 15 days. The maximum vesting period would be 180 days for a 1:1 conversion.
Another idea that comes to mind is for stakers to only earn wstETH yield at a flat rate, say 8-12% APR, and stay competitive with other LSD’s. Locking your $ACID will give a boosted wstETH yield based on duration of your lock, as well as ability to earn esACID. This will heavily incentivize locking over only staking due to higher wstETH yields and the ability to farm more $ACID. The marathon participants will also enjoy this as it allows people only looking for competitive yield a chance to earn real yield, but allows them to earn real yield and maintain/increase their share of the treasury.
EDIT: The idea above was actually already discussed by the 0xAcid team and will be going into a governance vote on April 1st. What a bunch of chads.
I’m still bullish on 0xAcid overall. I think they have a smart team and its still early days. I believe they’ll make the necessary tweaks for sustainability. People looking to park their ETH or invest in LSD’s after the Shanghai upgrade should definitely consider 0xAcid. Plus their branding is also A1, who wouldn’t want to buy a token accompanied with such fire graphics?