I recently did a dive into the Idols ecosystem and unexpectedly bought a few. Not your typical 10K NFT project!
An Idol🧵, or
The bull case for $VIRTUE.
Not Financial Advice, and do your own research.
2/ This will be a simple thread, as I'm but a simple Dumpling🥟. Here's how I understand the Idols:
There's an Idol treasury (currently at 2701 ETH) which is staked as stETH at $LDO (stake.lido.fi). The 9,999 Idols NFTs each are entitled to the fee free pro rata yield.
3/ So each Idol is worth about .27 ETH of ETH backing at the moment and generating a bit of ETH via Lido (3.98%). Nothing to write home about, but pretty cool.
But wait -- why then are they trading at .18 ETH? Now I'm getting interested...
opensea.io/collection/ido…
4/ Time to head to their docs. One question that's on my mind -- how is the team paid? Looks like 10% of the Idols (1,000) are reserved for the team with a 1-year lock. And 100% of the ETH from the mint went to the treasury. So I see this as the initial entrants paid the 10% fee
5/ But new entrants are getting the staked, ETH backing at a discount if they can buy under the .27 ETH price. In reading through the docs, I don't see anything to invalidate that. So I'm getting more interested.
docs.theidols.io/idol-nfts
6/ I like to keep ETH exposure, but the LDO staked ETH returns of ~4% never interested me that much. But thanks to @PhilippOnChain 's spiffy Dune analytics page, I can see that an Idol purchased at .17ETH is actually earning 6.3% because of that discount. 6.3%>4%...
7/ IMO 6.3% on USD is trash, not even close to keeping up with inflation. But 6.3 on ETH, paid in ETH, is pretty good. If that was all there was I may or may not have proceeded. But we have the chance that that treasury will grow with a clever incentive structure. Enter $VIRTUE.
8/ The $VIRTUE token, when staked, entitles the holder to a pro rata share of the fees (7.5%) generated when Idols are sold. There are currently ~160K $VIRTUE tokens staked and they are currently yielding ~50%, paid in ETH. Okay, so why does this matter?
9/ Well, it either will or it won't. It may just stay at these levels without many more buyers. Is 50% attractive in #GoblinTown? Paid in inflationary governance tokens, no, but paid in ETH I think it is pretty attractive. So if there is modest buying of $VIRTUE things get spicy.
10/ There is a curve pool for $VIRTUE with a bit of liquidity (~80K). Currently there are 668 holders who are staking 160,000 tokens which are worth about $4 apiece on the curve pool. You can also buy them by bonding, and when a user bonds, that ETH goes to the idol treasury.
11/ One can see the seeds of a virtuous cycle start if people want that $VIRTUE yield. More people buy virtue, eventually bonding it. That pushes the backing price for each Idol higher, which should push the floor price for each Idol higher. And the bonding curve gets --
12/ More expensive over time. Current prices on CRV are .0025 ETH while the bonding price is closer to .005 ETH. The later stages of the bonding curve are around .1 ETH per $VIRTUE. So you could see how things could get a little crazy if this project is a success.
13/ The most interesting part to me is that the project could also just be a modest success. It's not a Make-It-Or-Die type of project, because of the ETH backing for each Idol, and the yield generating aspect of it. No one else is going to drink the Idols Milkshake. Not even DDL
14/ Lastly, I want to point out the risks (that I see). The project is tied to the success and security of Lido. The project will also carry some of its own smart contract risk. They were audited by Certik but who knows about audits these days. I'd love to hear from a team
15/ Member about some of the aspects of the protocol that are immutable, and what plans are for staking after the merge. But I can say that I have purchased a few Idols and $VIRTUE and have also claimed the stETH rewards generated by the Idols and the ETH generated by $VIRTUE.
16/ The project caught my eye when they made this amazing custom Guardian of Beanstalk Idol for $BEAN -- I liked the art and then once I knew they real value via a treasury I became interested.
17/17 Have fun out there. One nice thing about bear markets is the chance to learn about new protocols and to pick up good projects on the cheap. It's just annoying to not have enough liquidity to do it properly. I should have listened to @bitcoinpanda69 when he called the top!
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