The Tomb Finance Debt Phase

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loiynes.medium.com8m ago

If you followed my previous post on Fantom’s ecosystem’s Tomb Finance opportunity or have previously been invested in Tomb Finance, you may have experienced periods where the TOMB/FTM ratio was below peg, you may even have had the opportunity to accumulate TBONDs, or you may have seen your yield in the Masonry temporarily drop to 0% and not recover to where its previous high was. Welcome, to the Tomb Finance Debt Phase.

On 19 December, at about 12 midnight, Grim Finance was hacked. LP tokens were stolen and dumped on the market. Tomb Finance was not spared and saw the TOMB/FTM ratio tank from roughly 1:1 to a low of 0.79:1. This kicked off the Debt Phase we are currently in.

https://stats.tomb.finance/

Sure enough, the very next epoch when the new Time-weighted Average Price of Tomb went below peg, TBONDs began to be issued.

https://stats.tomb.finance/

Here we are, almost a week after the Grim hack (Merry Chrysler btw) and people are still holding on to their TBONDs. Each of these TBONDs represents a TOMB token that was burned. Today, we sit above peg, the masonry has started minting TOMB again, but if you’ve been in the Masonry this whole time, you would probably have noticed by now that you aren’t getting the 500+% APR that you were getting previously, instead you’re only getting 200% (Well that’s technically still pretty good but it’s not giving the DeFi degens the dopamine kick they initially got). So why is this? That’s because of the Debt Phase.

The Tomb Finance Docs explain this. 65% of the minted TOMB in the Masonry is sent to the Treasury Fund to prepare for TBOND Redemption. Those TBONDs don’t pay themselves! Only when the TOMB in the treasury is sufficiently full to meet the bond redemption will the Masonry APR return to its former glory and we can all go back to being high on yield.

So how far away from that are we?

Right now, about 24.2 million TBONDs exist, this means the treasury need to accumulate 24.2 million TOMB. This number can decrease as people claim their TBONDs but at the time of this article, this is the amount needed. Right now, the treasury sits at 8.3 million, with almost 16 million more TOMB tokens to mint.

https://stats.tomb.finance/ 24 hour data

That staircase look represents the TOMB being minted each epoch that goes straight to the treasury. You can take a look at the treasury from this address: 0xF50c6dAAAEC271B56FCddFBC38F0b56cA45E6f0d

Currently the rate the treasury expands is about 700,000 TOMB tokens per epoch. Technically this rate is also increasing ever so slightly because TOMB mints at a % of the circulating TOMB supply. I’ll be honest, I couldn’t get the math to fit and I suspect it’s either the circulating TOMB supply figure I’m using is wrong or the % increase in TOMB per epoch is less than 1%. Regardless, we can still approximate the rate of Treasury growth at roughly 700,000 TOMB per epoch. (We can also estimate that this 700k increases by about 1% per epoch too but we would still not be able to skip an Epoch so I’ll just ignore it)

Okay okay so here is when the Debt Phase is likely to end:

Treasury Debt/Rate of treasury growth = 22.7 Epochs. Right now, at the time of publishing this article, we’re at Epoch #783 before 25 Dec 3.30am UTC. We’ll end the final Debt Phase Epoch at 30 Dec 6.30pm UTC. At which point, the treasury will stop needing to take up yield, meaning the Masonry APR will rise again. All of this is under the assumption that the peg remains above 1, below 1.1 and no new TBONDs are minted.

The 1.1 peg is an important factor to consider here. If we go above a peg of 1.1, TBONDs can claim a bonus ((TWAP-1) x 0.7) TOMB for each TBOND and once again, someone’s going to have to pay for that. Prior to the peg value of 1.1, TBOND holders have to decide between the bonus % and the opportunity cost of not farming yield.

IF the Debt Phase does end, TSHAREs will be able to resume a higher APR again. If the Treasury takes up 65% of the minted TOMB now, we can expect APR to rise by 100/35=2.86 times. Right now, it is at 202%. Of course, the more people stake TSHAREs in the masonry, the more the rewards are split up amongst participants, so don’t expect a full 2.86x increase in APR, but it’ll be pretty close, I’m guessing.

Currently 32.6k TSHAREs are already staked in the Masonry. Only 37.9k TSHAREs are circulating, so I wouldn’t expect any significant dilution of the 2.86x multiplier on the current 200% APR figure (No more than a 20% hit on the multiplier because there just isn’t enough TSHAREs in the system). Technically this also means that each TSHARE will be making more than 2x what it’s making right now, what does this say about the value of each TSHARE?

From a tokenomics perspective, I can only imagine increasing demand in TSHAREs across the whole Fantom Ecosystem. Meaning players may move their funds into TSHAREs to join the Masonry. This is good for players on Tarot because the increased demand will push up the yields there. People compounding Tomb Finance LP on Reaper will also see their APR rise as people exit their staking positions for the masonry. It makes sense to me that the price of TSHAREs will rise at this point, which also benefits LP stakers as their TSHAREs can compound for even more LP.

All the above points are purely tokenomics and have nothing to do with the price action of FTM or new interest in Fantom’s ecosystem.