Thread by @DefiIntro

1. @tombfinance's $TOMB lost peg and here is my take on the issues. I won't take the taxation exploit or FUD into the account. I still believe that even without that, at some point it had to happen.

2. If you watched my video about @tombfinance, in the last 2 mins i told about my concerns about the protocol. This model has never worked to this day. Tomb devs had some ideas about how to achieve peg with launchpad or taxation, but didn't convince me.

3. Let's try to understand why it's not gonna work in the long run.

So there are 3 tokens in the protocol. $TOMB $TSHARE and $TBOND.

TOMB is supposed to be pegged to $ftm, this protocol chose to go this way instead of $USD.

4. There is 3 potential possibllities for the protocol:

1 TOMB > 1 FTM
1 TOMB = 1 FTM
1 TOMB < 1 FTM

When TOMB's price is above 1 FTM, more TOMB is printed to give to TSHARE holders. So in the first one, we print more TOMB.

5. When TOMB's price is below 1 FTM, you can buy TBOND by burning TOMB. TBOND will be printing more than 1 TOMB (or at least 1 TOMB) if TOMB's price is above 1 FTM again.

So in the end, we again print more TOMB.

6. When TOMB's price is equal to 1 FTM, ask yourself this:

" Will you accept TOMB instead of FTM when selling things on blockchain?"

I know I won't, so people will sell TOMB to buy FTM, and we are going back to 1 TOMB < 1 FTM.

7. In every possible outcome, the protocol is printing more TOMB.

So no matter what, protocol relies on newcomers to buy newly printed TOMB to hold peg.

8. When there are no newcomers, noone new coming to buy your TOMB to farm, so once a whale takes profit, bank run starts.

It happened the same with bdollar.fi, and @IronFinance .

Everything is pink and shiny till a whale dumps his tokens on you.

9. I don't believe under collateralized algorithmic stablecoins will work forever. Once a whale dumps, peg's broken.

And i definitely don't believe seigniorage model will work if you don't have armed forces to impose people to use your currency.

10. Hope @tombfinance team have plans to save the peg, but honestly, it is a very long shot.

Don't forget that if there is a huge opportunity, it carries a huge risk. Nothing is free, and try to understand what you're into before aping into protocols.

Stay safe!