Another Conversation about DRIP’s Sustainability, Part III
TVL, Whale taxes, and Bears — Oh my!
Marcus: I’ve read Part I, and Part II, of your “Another Conversation About DRIP’s Sustainability” and how we need to think in terms of DRIP & BUSD themselves, rather than dollars, which helps, but it still doesn’t fully explain how after a year I receive $3,400 from my initial $100.
I mean, we’re just talking about a currency conversion, right?
Patrick Cryptozoa: True, but the difference is that the DRIP Network contracts controls the balances of DRIP and BNB in the DEX, as well as the possible future minting (if necessary), which is not possible with the US dollar.
Price in USD fluctuates against how valuable DRIP becomes in dollar terms.
Early in the DRIP Network’s history, Founder and Main Dev Forex Shark has stated that only 35% of the network needs to be locked up for the model to be sustainable indefinitely, and currently the amount locked up is 64% in the Tax Vault.
The Tax Vault is used for DRIP payments. The other Liquidity Provider is Pancakeswap, which holds another 20% liquid supply, so only 16% is held in individual wallets.
When we discuss your $100 turning into $3,400 by the end of the year, what we are really talking about is 0.23 BNB deposited into the pool, withdrawing 0.83 DRIP, which is then deposited into the system — locked away and only paying 0.0083 DRIP each day.
If you hydrate each day, then at the end of 365 days you’d have 31.36 DRIP. But, even then, you would only be able to withdraw 1% of that total amount, or 0.31 DRIP, not the full 31.36 DRIP.
So, you Claim the 0.31 DRIP, Sell/Deposit the 0.31 DRIP and withdraw/receive 0.087 BNB in return. The amount of DRIP increases in the Pool, and the equivalent amount of BNB in dollar terms gets reduced to pay you.
It’s a closed system.
Only the Tax Vault, or individual holders of DRIP retain DRIP.
- Selling DRIP increases the amount of DRIP in the Tax Vault
- Selling DRIP reduces the equivalent amount of BNB in the Tax Vault
- Buying DRIP with BNB increases the supply of BNB in the Tax Vault
- Buying DRIP decreases the supply of DRIP in the Tax Vault
- The ratio of BNB/DRIP is currently 0.2950887454273149 (The amount of BNB/The amount of DRIP)
- Multiply the BNB/DRIP Ratio (0.2945985795047338) * Price of BNB ($431.01) = Price of DRIP ($127.28).
As people buy DRIP, it increases the amount of BNB in the Tax Vault that folks sell DRIP for in exchange. Value is raised by increased use cases that reduce the supply of DRIP in the Vault, increasing the BNB to DRIP ratio, and increasing the price of DRIP.
So, when you multiply the increasing BNB/DRIP ratio * BNB Price = Increasing Price of DRIP.
The very act of participating in the DRIP Network reduces the supply of DRIP by locking it away, reducing the amount of DRIP, and increasing the supply of the BNB used to buy it, which in turn increases the BNB/DRIP ratio, which in turn increases the dollar value which the DRIP is eventually sold for, 1% at a time.
What if everyone/the majority sold at once?
Captain Defi’s outlines this scenario in his excellent article “The Drip Network, A Comprehensive Tax Sustainability Model”.
In the article Captain Defi explores if the Central Cohort of nearly 50k wallets sold their DRIP that’s in circulation:
“This generates a cycle approach, whereas higher capital positions start selling, allowing the supply to increase slowly and the demand to slowly increase. Perhaps a slow price drop occurs due to an increase in supply; this enables new investors to come into the ecosystem and trade DRIP with more minor initial capital requirements and further begin to lock away liquidity.
So, in an extreme scenario such as the above, it is IMPORTANT to remember that this all will happen very slowly, and the network continues to generate tax flow and utilize available capital comes into play regarding sustainability. This would unfold so that old capital would begin to sell using their 1% dividend from the tax pool. Those new tokens are recirculated into new hands and generate new tax into the tax pool to account for the capital leaving. It is a cycling economic system. Which in its nature is highly sustainable.
Keep in mind; the above is AFTER nearly 83% of the ENTIRE faucet network withdrawing, which is HIGHLY improbable considering there is MINIMAL incentive to do so given the nature of investment into the DRIP network.”
~from “The Drip Network, A Comprehensive Tax Sustainability Model”
It’s another Parade of Imaginary Horribles scenario so unlikely given the extremes of the case. And with new use cases draining away the supply of DRIP, makes it even further than likely.
Whale Taxes
In Captain Defi’s Youtube Interview with Mikey, Captain Defi expressed that the Whale Tax was also a big, if not biggest contributor to the sustainability model of DRIP.
“…if they (the whales) were to start selling, their tax pool because of that whale tax would actually kick back most of the tax rewards used to sustain the Tax Pool…”
~ Captain Defi, “DRIP Network Sustainability with CaptainDeFi”
In the interview, Captain Defi says that the top 7 holders of DRIP hold a “Good Chunk of DRIP,” but when you sum up the top 7 accounts, the free DRIP that could be dumped account for only 3.28%.
Can we round that down to zero?
What is DRIP?
DRIP is a project that is able to provide passive income through smart contracts in Defi. It was created on the Binance Smart Chain, and the DRIP Token can be bought with BEP20 BNB.
The bedrock of DRIP is the feature of paying 1% on your investment per day. You can either pull that amount out and reer day, or you can “Hydrate” or recompound your earnings and compound the 1% against the new amount. By Hydrating you start to see the 3678% APYs by the end of the year (fees excluded for simplicity).
Come to Cryptozoa.com, check out the DRIP passive investment, and join the Cryptozoa Team!
How to Start
- Go to https://drip.community/fountain, and exchange BNB for DRIP.
- Go to the Faucet, and enter a Buddy address in the Referral section. Consider adding the Cryptozoa team member Jesse’s address for your Buddy: 0xb0688261bce86134280b3bff4b6da625049c16c9
- Deposit at least 1.12 DRIP (Ensure you have 0.05–0.1 BNB for transaction fees.)
You’re setup on DRIP. Get ready to receive 1% daily! But, do come back regularly to hit that hydrate/recompound button!
Cryptozoa Telegram — https://t.me/joinchat/PbTulqLoCmAzZmQx
DRIP Lightpaper — https://www.docdroid.net/0i3RJTu/drip-lightpaper-pdf
DRIP CONTRACT LINK — https://bscscan.com/token/0x20f663cea80face82acdfa3aae6862d246ce0333
NOTE: The amount Deposited is not withdrawable. In exchange you receive 1% of that staked amount on a 24 hr basis for the next 365 days, which can be rehydrated/compounded, or claimed.
The Animal Farm — https://theanimal.farm
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