Thread by @rektdiomedes

Thread: How @ProtoFiProtocol Built A Quarter-Billion Dollar TVL In Two Weeks

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So, an interesting new AMM I wanted to do a thread on is Protofi, on Fantom....

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I first learned about Protofi from @bms3king earlier this month when it had around 20M TVL.

I got into both the Pool One’s and Pool Two (explanations below), and since then it has gotten up to a 250M TVL…

https://twitter.com/ProtoFiProtocol/status/1492065019940462594

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However, on the surface it looks like a pretty basic Panther or Pancakeswap clone, so why has it had so much success?

Well, in this thread I wanted to posit a few thoughts on that question...

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One: They introduced a couple key tokenomic changes.

Usually AMM’s like this suffer from the protocol token or ‘farm token’ getting dumped into oblivion, and after some initial success, the protocol withers away and dies...(cont)..

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In addition, many folks will see this type of AMM and just assume that is what will happen, and not even bother messing with it...

As a result, many new 'farms' never manage to get to even 8 or even 7 figure tvl..

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However, Protofi added an interesting change to the model, by creating a two-token system where LP'ing the main token (PROTO) earns you the secondary token (ELCT) that you can then stake to earn protocol revenues, paid out in either $DAI or $FTM.

(See #FrenchChart below)

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Two: Protofi has a great UX that looks professional AND points your attention to important metrics that help you generate trust in it and in its protocol tokens.

Namely, they have a constant meter on the home page of the protocol showing the Market Cap to TVL ratio.

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At this point on Fantom we have pretty good ideas of what typical MC vs TVL ratios are on mature protocols that have ‘crested the peak’ of their inflationary tokenomics (Spirit, Spooky, Scream, etc).

As a result (cont.)...

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...when the Protofi Homepage shows that the dual “farm tokens” have a combined market cap of only 8% of the overall TVL, this inspires trust, in that this ratio is very much in line with (or even below) the standard among similar (mature) protocols.

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Three: @ProtoFiProtocol also did a very good job imo when deciding on the ratio between “Pool One” rewards and “Pool Two” rewards.

Very similarly to what Defi Kingdoms did, they made the “Pool Two” rewards over 10x larger than the “Pool One” rewards (cont.)...

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... This forces you to stop and think, “Hey, if I’m gonna trust this protocol enough to farm FTM/USDC at 150% apr, and believe the reward token won’t instantly go way down in value, then why wouldn’t I want to just farm that token itself as well in Pool Two, for 2000% apr?”

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..in comparison to other AMM’s that set the Pool Two rewards too close to the Pool One rewards, (say 300% vs 150%), where the delta is not enough to justify the additional risk, leading to the protocol token just getting dumped and AMM withering away.

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Four: They seem to have chosen a real sweet spot vis a vis farm entry fees.

For those who don’t know what I’m talking about, some AMM’s will set entry fees of 4% to join a farm/pool.

This is generally looked-down upon and associated with lower quality farms (esp BSC)...

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...Protofi did choose to incorporate these fees, however they set them much lower (currently .25% or .35% depending on farm).

These fees go to the protocol and are in turn distributed to ELCT stakers (cont.)...

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I think this was very smart and I don’t mind these (very low) entry fees at all.

To my mind they are more reminiscent of the 0.1% exit fee on @beefyfinance vaults or 0.5% fee on @QiDaoProtocol vaults, for sake of deterring bots, making people ape more purposefully, etc.

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Five: The last- but certainly not least- of the reasons I think Protofi did so well these first couple weeks, is that they made a point to demonstrate user safety, namely via kyc’ing to @RugDocIO and getting themselves listed/analyzed on RugDoc as well (cont.)...

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Apparently they kyc’d back when the protocol was still intended for Polygon, but still, as seen below, this provides a level of legitimacy that can go along way to giving users the faith to tie up funds in your platform.

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Note: @RugDocIO is VERY thorough so the above breakdown is actually quite positive from them.. there's almost certainly protocols you use every day that they have labelled as 'high-risk'... (well worth checking them out!)...

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So yeah, those are my thoughts on @ProtoFiProtocol!

I am not affiliated with the team in any way, am not vouching for them, and encourage anyone reading this to do their own due diligence, but I do think the protocol’s success thus far is very interesting/impressive😊

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Here are some additional links to articles/tweets/etc about Protofi…

First, another one from @bms3king, who I learned about it from (make sure to follow him!):

https://twitter.com/bms3king/status/1491218471929393155

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Here, one from @Crypto_Mac_D, who has also been talking a lot about Protofi and got into it extremely early:

https://twitter.com/Crypto_Mac_D/status/1491157312928903168

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An awesome article on Medium by someone called ‘Loiynes’ (couldn’t find their twitter account – please tag me if its yours!):

loiynes.medium.com/protofi-deep-d…

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And... an excellent thread from my man @milesdeutscher:

https://twitter.com/milesdeutscher/status/1489084148774219778

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If you found this thread interesting please retweet and follow!

And for more great alpha on yield farming/Fantom/etc in the vein of @ProtoFiProtocol and similar stuff, check out the Chads listed below:

@Prof_Crypto_B
@FTMAlerts
@rektfoodfarmer
@deficryptofarm

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And more Fantom/Yield Farming Chads:

@Route2FI
@phtevenstrong
@Ceazor7
@chng_raymond
@BillyBobBaghold
@takegreenpill
@completedegen
@Jacktheoiler

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