Thread by @FinGeekCo

People have been asking me all day if Titan (aka @IronFinance) was a rug. Did the team steal the money?

Here is an ELI5 explanation (While skipping some unnecessary details): $IRON $TITAN @IronFinance

1/22

Let’s explain @IronFinance. It is a fork of @fraxfinance. IRON is a currency with the following rules: You can exchange $0.75 $USDC and $0.25 worth of $TITAN for 1 $IRON. The $USDC is sent to a vault and the $TITAN is burnt out of existence. Simple.

2/22

The reverse can happen too. 1 $IRON can be exchanged for $0.75 USD and $0.25 worth of $TITAN anytime. The $USDC will be extracted from the vault and $0.25 worth of $TITAN will be minted which you can sell to get $1 back in total. Are the rules clear?

3/22

No one wants to use $IRON as a stablecoin, so Iron.finance decided to give out free $TITAN rewards for people who hold $IRON. APRs were decent so people decided to get more $IRON for themselves to farm these free $TITAN.

4/22

$IRON can only be minted by burning $TITAN, so $TITAN was in high demand, causing $TITAN prices to pump. It started at $0.5 and went to $64 at its peak! Things were looking good and rosy for $TITAN prices.

5/22

This is classic reflexivity in action. investopedia.com/terms/r/reflex…

Decent APRs ➡️ Demand for IRON ➡️ TITAN supply burnt ➡️ TITAN Price Pump ➡️ Higher APRs ➡️ Higher Demand for IRON ➡️ … and so on.

It is a cycle that feeds itself. APRs went from a humble 50% to 960% at peak.

At the peak, $TITAN rewards were 3% of what you put in $IRON daily, and people started throwing life savings into this. It is a stablecoin farm after all…. 1 $IRON = $1..... Rightttt?

7/22

What happens when $TITAN prices are too high? The farms will simply give out too much $TITAN supply. At $TITAN's peak of $64, the farms were handing out $48m worth of TITAN a day! What happens when supply outstrips demand? Prices fall! Simple!

8/22

There weren't enough people minting $IRON to burn all the $TITAN being flooded into the market. When $TITAN prices started to look shaky, people started selling their farmed $TITAN instead of holding them. This caused $TITAN prices to dip.

9/22

Iron.finance uses a 10 min TWAP to determine how much TITAN it should give you for redeeming 1 IRON.

Here is an example: TITAN dropped 25% from $64 to $48 within 1 minute. The 10 min TWAP oracle lags behind and tells the protocol that TITAN is still around $60.

10/22

This means that anyone exchanging 1 $IRON for $0.75 USD got $0.25 worth of $TITAN at $60, which was only worth $0.2 in real time at $48. In other words, 1 $IRON is now redeemable for only $0.95 worth of goods. $IRON prices on DEXes started to drop to $0.95 in response.

11/22

Reflexivity primarily feeds on optimism and good vibes. What happens when $IRON deviates from $1? Some people will start to panic and sell their $IRON, thinking that this stablecoin may not actually work. $IRON depegs even more.

12/22

$TITAN Dumps➡️$IRON depegs ➡️$IRON holders panic sell and redeem ➡️$IRON redemptions get 75% $USD and 25% $TITAN ➡️$TITAN is sold for USD, causing $TITAN prices to drop ➡️10 min TWAP oracle lags behind ➡️IRON redemptions depegs further➡️...

13/22

What made this worse was that TITAN is minted everytime there is an IRON redemption. The cheaper TITAN prices got, the more TITAN got minted for every IRON redemption!

Example: When $TITAN is $0.01, $0.25 worth of $TITAN is 25 $TITAN! 25 $TITAN is $1600 at its ATH!

14/22

TITAN is now experiencing unchecked hyperinflation. Think of a central bank with debts to pay, but no cash on hand, so they decided to print more cash. This is classic Venezuela, paying debts by printing cash.

15/22

See the supply of $TITAN

I bet you understand now why $TITAN charts have no bounce, it's straight down all the way. Each time $TITAN tried to consolidate and bounce, $IRON redemptions would inflate the supply of $TITAN. Its straight to $0.

16/22

It is an economic failure played out in a shorter timeline vs what is happening in Venezuela. ALL of you who lost money are willing participants in this economic experiment.

17/22

When you brought IRON/TITAN, you knowingly signed up for the experiment. I can't be sorry for you if you didn't read the fine print or look through the documentation to understand it.

18/22

Lastly, some apes are buying $TITAN and causing the prices to rebound. I would suggest you sell before 5 pm UTC.... if you bothered to read the announcements. Redemptions of IRON have been paused due to a bug and hyperinflation will resume soon.

The end. 19/22