Platypus Finance | Hidden Gems – DeFi

Platypus Finance | Hidden Gems – DeFi

Review Date: May 3, 2022

Platypus Finance Deep Dive (77%)

Website – Documentation

Protocol Summary

Platypus aims to provide the best stablecoin swapping experience on the Avalanche network. It does this by taking the best lessons learned from Curve while implementing several new mechanisms in the protocol and AMM design. Key features include:

• All liquidity provided is single-sided, making it easier to create positions and eliminates any possibility of impermanent loss.
• Each asset is considered its own pool and can interact with every other asset instead of being forced to build pairs or specific pools – the Curve structure fragments the liquidity of an asset among all the pools it is in. Platypus’s structure also makes it considerably easier to add new assets into the ecosystem as new specific pools don’t need to be created.
• Platypus uses a newly developed coverage ratio as the tool to balance and maintain healthy pool sizes by encouraging users to interact with and swap into pools with a higher ratio.
• Staking rewards for all assets are paid in PTP. PTP can itself be staked, which allows you to start earning untransferable vePTP over time. vePTP provides large boosts on staked stablecoin rewards, but unstaking PTP removes all accumulated vePTP.
• Governance voting is not live yet, but when it begins will allow an experience similar to Curve where votes can be cast to boost the emissions of specific pools.
• There are also exciting new additions on the roadmap, such as an NFT collection that will beneficially interact with vePTP to boost staking rewards even further.

Team

The team is anonymous, with not much to go off of publicly besides their Twitter pages.

• Founder: https://twitter.com/MrDuckbill. From an interview, he worked at a crypto centralized exchange, got a crypto-related Masters, and did his thesis on the underlying concepts that became the backbone of Platypus. Came across fairly knowledgeable and well-spoken in the interview.
• Smart Contract Lead:  https://twitter.com/MrBeaverTail

There are also a couple votes of confidence in their favor. The main one is their seed raise: in December 2021 they raised $3.3M from multiple funds including Three Arrows Capital, DeFiance Capital, and Mechanism Capital, along with many AVAX-native platforms and incubators such as AVA Labs, Avalaunch, BENQI, and Yield Yak. Secondly, multiple audits were done, and the Hacken audit found only a couple of low severity issues. Finally, Duckbill is also an advisor for recently launched Wombat Exchange (also strong VC presence), once again establishing a deep presence in the DeFi ecosystem.

The team has also displayed multiple positive traits: updates are happening at a brisk pace, and engagement with the community has been fairly high and positively received. 

Product Development and Functionality

Development has been moving along swiftly with the base product operating since January 2022, with multiple new tokens already added. The starting list of stablecoins were USDT.e, USDC.e, and DAI.e, with native USDC and USDT added more recently, followed by a separate “alt pool” for algorithmically pegged stablecoins including UST, MIM, and FRAX. Platypus also just released its first non-stablecoin pool of sAVAX-AVAX, and added WAVAX compatibility – the platform foundation allows highly efficient swaps for assets with the same value, and they are branching out to coins that don’t necessarily have a value of $1.

All of the core functionalities of the platform work – fees on stableswaps are low (and can even have positive slippage when swapping from a low coverage ratio to a high one), the pools reward staking in coins with higher collateralization ratios to encourage equilibrium, and PTP can be staked to earn vePTP, which then boosts the staking rewards from any liquidity providing done. 

Besides the upgrades to the base protocol, Platypus is also working on gamifying its platform to bring a lighthearted, engaging, and easy-to-use interface and experience. While this includes many cosmetic changes, the most important upcoming feature in this vein is the launch of an NFT collection that will have tangible effects on the usage of the platform.

The NFTs will be 10,000 Platypus Heroes with attributes and a skill, where the skills have direct beneficial interactions with vePTP in various ways.

More information on vePTP and the NFTs can be found here.

Token Economics

The supply distribution and vesting schedule is outlined here. 

Notable points are:

• 40% of all tokens are reserved for liquidity mining, with a discretionary unlock rate based on platform factors (most likely the amount of staking activity).
• Private sale was 16% of all tokens, 10% of that unlocked at TGE with 3-month cliff and 18 months vesting.
• Team kept 15% of tokens, 0% unlock at TGE, 12-month cliff and 30 months vesting.
• Treasury holds 20% of tokens, 5% unlock TGE, 6-month cliff and 36 months vesting. However, governance is not enstated yet to fully influence treasury funds.

In the short term, the main balance in price action is sell pressure from the Private sale (0.80% of all token supply unlocks every month for participants in the sale) and the general behavior of platform users. Yield farmers are incentivized to stake their earned PTP to earn vePTP and boost future earnings, with the option to buy more PTP on the market to accelerate their earnings. A savvy investor would utilize the Booster Calculator on their staking page to find the balance between staked stablecoins and PTP for optimal earnings. Alternatively, users can interact with one of the “overlaying” protocols (what Convex did for Curve), discussed below.

Competition Comparison – Overview

Curve is the main competitor as they offer the most similar service of a stablecoin swap platform. The reason why Platypus even came to exist is that the founders felt they had the underlying tech to build a better version of Curve, notably through an innovative AMM structure and their version of vote-escrowed token mechanics and incentives. 

Platypus’s vote-escrowed system is similar to Curve but has simpler linear accumulation over time (instead of committing to a time lockup), and also goes deeper by punishing unstaking PTP with the entire loss of your accumulated vePTP with the goal of making PTP liquidity even stickier. The other factor that emerges from this is the development of Convex-equivalent platforms to interact with Platypus in the same way the original Convex did with Curve. In fact, there are already three yield aggregators that have formed early partnerships with Platypus: Echidna, Vector, and Yield Yak. This forms a more complex dynamic of vying for platform dominance and identifying who the long-term winner will be. 

Competition Comparison – Quantitative Metrics

The most telling signs of a market leader developing is by looking at trends in Total Value Locked (TVL).

While some of these numbers should be treated with a grain of salt (point in time estimates, increases in small numbers show high percent growth), there are clear patterns forming: Curve on AVAX has assets draining away from it, Platypus is slowly accumulating deposits, and that Vector is currently seeing the biggest increase in adoption.

Next, we can look at the FDV/TVL ratios across the board to gauge valuations. A lower number is generally desirable from an investment point of view as it implies you pay less per dollar of value locked that the protocol is already employing. 

Although Platypus might appear more “expensive” per dollar of TVL than Curve, we can also justify the higher ratio value by the market’s expectation that it also has a much higher potential for growth. We can see that in both cases, the “overlay” projects have a lower ratio value than the base protocol, and that both Vertex and Echidna are even comparatively cheaper than Convex.

We can also look at the daily dollar volume that Curve and Platypus transact as an additional measure of how much the platform is used every day. The highest daily volume pools on Avalanche CRV are the 3pool (UST + USDC + USDT) with $6.6M volume and the USDC.e + USDC pool with $3.9M. Total daily volume on AVAX CRV is around $24.7M.

While we don’t have a 1:1 comparison because Platypus’s pools are structured differently, Platypus’s 24 hour volume in just the USDC pool alone is $33M. The sum of daily volumes across all the main pools is in the vicinity of $113M – clearly passing Curve’s presence on Avalanche. For comparison, Curve across all chains achieves daily swap volumes of around $316M.

One final measure for which of the overlays might capture the most value going forward is looking at each of their accumulated vePTP.

It’s possible that we might see a “winner takes all” environment, as the platform with the most vePTP will have the highest boosted rewards and influence on emissions once voting launches. Yield Yak is diversified across a larger number of assets than the other two protocols, explaining its significantly lower amount of accumulated vePTP. Vector is currently in the lead, but it is still too early to call it a definite winner.

Potential for Adoption

Platypus’s TVL has spent the majority of the lifespan of the platform in the $700-800M range, which already signals strong early adoption when many platform features are still further down the roadmap. The founders are very bullish on Avalanche as an ecosystem and are committed to create the best stableswap platform on the chain. Considering Platypus has $810M TVL at time of writing and Curve on AVAX has $1.07B, there is clear room for growth. The other side of this is that since there are no short-term plans to branch out to other chains, they are limiting themselves on adoption in that regard.

Site visits peaked in January at 800k, with Feb having less than half at 370k and March 315k. However, both Curve and Convex followed a very similar pattern of January being a local top for all of them, with a 40-60% drop for all three to February and March being slightly lower than February. This is mostly in line with crypto prices and sentiment as a whole in the market at this time. However, Platypus’s “overlay” projects are the real winners here: Vector Finance went from 35k visits in February to 125k in March, a 3.6x increase. Echidna Finance launched around the same time and similarly had a 3.6x increase from 18.6k to 68k site visits.

Conclusion

Platypus Finance and projects that spun off of it are clearly capturing market share and exhibiting strong growth, especially as value slowly drains out of Curve and daily volumes are strong. When Convex came out it eventually became a better investment than Curve, even if Curve was the original innovator of all of the new market dynamics. Note the chart below, with Convex in light blue and Curve in dark blue. Despite the rocky start, October 2021 was when Convex was cementing its spot as the leader of the curve wars and led to the next three months of explosive growth. Even after the large retracement in 2022, we can see Convex has bounced back strongly and has shown better price resilience.

As such, the current conclusion is that while Platypus is a great project just like Curve is, it suffers from the exact same issue of the meta-layer (Convex/Vector and others) most likely being a better investment. The only thing that could make PTP more attractive is if the team focuses on other unique uses for the PTP token that can’t just be dropped into the Convex-equivalent as the best play. The NFTs are a good example of this, but they would probably need to innovate further to give PTP the best chance at outperforming in the long run.

As it stands now, Vector Finance appears to be the best way to play this group of projects. While it is absolutely worth keeping a close eye on the relationship between it, Echidna Finance, and Platypus itself, Vector has exhibited great user and TVL growth while still being a very early-stage project. As it is also the current leader in vePVP staked, it should yield the largest APR boost to stakers, encouraging further user growth and adoption. It is important to note that there is a high possibility of short-term volatility in all of these names as market conditions are currently tenuous and the real utility of the tokens (voting and emissions gauges) hasn’t been unlocked yet. However, the team is targeting Q2 2022 for those features, and building a position in the time leading up to then could potentially prove profitable.