Was it a Pump and Dump? Few Will Ever Understand
DeFi influencers are under fire. Also, Set launches yield farming strategy and IntoTheBlock analyzes UNI distribution.
|Sep 23, 2020||2|
Hello Defiers! Another day, another drama,
DeFi influencers accused of creating a pump and dump token called $FEW
Set Protocol releases yield farming strategy
IntoTheBlock’s on-chain analysis of UNI distribution
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We’ll be talking about MEME so check out the epic video we made about it. The video was produced in partnership with Robin Schmidt of Harmony Protocol.
🙌 Together with Zerion, a simple interface to access and use decentralized finance, Perpetual Protocol, which provides decentralized perpetual contracts for any asset, and HackAtom V, a two-week virtual hackathon organized by Cosmos.
Few Understand This Shows DeFi is Loosig its Footing
A leaked Telegram chat has the DeFi community decrying that some of the space’s most well-known influencers were orchestrating a pump and dump scheme around a token called $FEW, an accusation the crypto personalities involved deny.
The question is whether the group was created with the specific purpose of leveraging the members’ follower base to push the price of a token they would later sell. The answer is probably not the same for everyone. There were more than 500 people in the chat at some point, and it’s unlikely that all of them had the same intentions.
This latest drama highlights that speculation surrounding self-proclaimed DeFi projects is reaching a frenzy. A dollar sign placed in front of certain words —specifically those related to memes or food items— spouted out on Twitter in some cryptical haiku-like message peppered with fire and rocket emojis, will create an irresistible urge to buy that token, regardless of what or who is behind it.
Next Big Thing
How did we get here? Because of the success of this new DeFi wave of meme-based, community-owned and led, hacked overnight, unaudited projects. After seeing coins like YFI, YAM and MEME soar, everyone wants in on the next big thing.
This wouldn't be an issue if those so eager to get rich off a DeFi experiment actually had the intention of producing something of value. The problem is when the only goal behind a token is for those who issued and own it, to shill it on Twitter and quickly sell it to others for a quick profit.
It’s unclear whether that was the intention of those involved in $FEW, but leaked chats have some in the DeFi and the Ethereum community speculating that to at least part of the group, it may have been.
Reverse Engineer MEME
So what actually happened: Yesterday someone started a Telegram group dubbed “The Experiment” and invited well-known crypto personalities. That someone might be a Telegram user who goes by the name of “Sam Mr.Boson,” as he appears to be the admin in leaked chat logs.
According to those screenshots, he created the group with the intention to “reverse engineer MEME,” which means: get a bunch of people in a Telegram group, airdrop a token, list it on Uniswap, ride the hype around that token to create an actual project around it, and hopefully see said token rally so everyone who held on to the airdrop has half a million dollars on paper a few weeks later.
Mr.Boson said the plan was to airdrop a token to the first 50 in the group. About an hour later, the 50-people target is reached and now conversation starts shifting to jokes about the “few understand” meme, some talk about what the project will actually do, while others are still trying to figure out what actually is going on.
The group grows to more than 500 people in less than four hours, according to Taylor Monahan’s play-by-play. By this time, many were asking about the token airdrop and sending their ETH addresses, while putting pressure for the token to be listed on Uniswap.
42k FEW tokens were created after that, and 40k were distributed among 52 addresses, with 769 going to each address, and 2k remaining, according to Etherscan.
Meanwhile, recognized and respected names like Alex Masmej and Anthony Sassano appeared to have been promoting the token on their Twitter feeds, while others like DeFi Dude said he was ready to start shilling the token in the chat. They have all since apologized for their statements, said it was all a joke and meant as fun, not as an effort to cash in.
Anthony Sassano | sassal.eth ⛽ 🏴 @sassal0xFew understand $MEME. Even fewer understand $ROPE. The fewest understand $FEW. Oh my.
It was around this point that screenshots of the chat were leaked, exposing what appeared to be a plan to create a worthless token, and pump and dump it. What was especially upsetting to some, was to see so many familiar names in the chat.
The original FEW token wasn’t listed on Uniswap, so it’s unlikely that the recipients had a chance to cash out (unless they did over-the-counter deals). Some of the addresses have also burned the tokens, according to Etherscan.
Fake FEW Scams
Still, others saw the opportunity to profit from the hype that was generated by widely followed and recognized crypto personalities, aka “influencers,” tweeting about it and at least two fake FEW tokens were added to Uniswap. One of them, which had $15k of liquidity, listed at over $80 and has since dumped to $35.
Others are taking advantage of the scandal to push yet another token: $MANY. *face-palm emoji.*
In the end, we won’t know for sure whether the creators and promoters of the token had the intention to pump and dump it. Unfortunately, even if they weren’t, scammers were still able to take adavantage of the project and the reputations of those involved were hurt.
“For those involved, this experiment showed that years of hard work and reputation can be quickly challenged by a few poorly thought out Telegram messages,” said Cooper Turley, Audius community lead and Defiant contributor, who was invited to the group. “Despite never listing, FEW is an experiment around user safety and social responsibility that we should all learn from.”
One thing that can be concluded from all this is that speculation around DeFi is starting to shift from throwing money and creating protocols that are at least aiming to serve some financial function, to throwing money and creating tokens that serve no purpose at all.
Set Releases Yield Farming Strategy
Comprised of ETH, DAI and ETH/DAI Uniswap LP tokens, the USDAPY Set puts idle assets to work as liquidity in Uniswap. This liquidity earns UNI tokens that are sold and normalized for more ETH/DAI LP tokens. The recursive farming cycle boosts the price of the Set, offering an annualized yield to holders. At the time of writing, the USDAPY Set is said to be offering a 66% APY.
While UNI is the first target, the USDAPY Set can support any other farming strategy, so long as it uses ETH or DAI as its primary fertilizer.
Cheaper Gas Fees
Underpinning the strategy is a new form of issuance where users can deposit any supported asset and receive the ETH USD Yield Farm Set in return. This means no exorbitant gas fees to provide liquidity, stake tokens or collect yield. All users pay a 0.35% premium when entering the strategy, good for covering gas costs and boosting the overall APY of the Set as a whole.
When redeeming, users also incur a 0.3% fee which is distributed back to the pool. As a stopgap, the Set is capped at 500 WETH or 200,000 DAI per redemption, ensuring the Set always remains sufficiently capitalized.
For Set enthusiasts, the introduction of the Yield Farm Set is exciting for two main reasons:
Passive automated strategies like ETH USD open an entire new avenue of tokenized asset management strategies.
The introduction of fees and premiums signals that Set Protocol will offer residual benefits to long-term Set holders.
As one of the few remaining DeFi projects without a native token, the launch of yield farming Sets with the V2 upgrade is a strong signal that the case for tokenization gets more attractive by the day.
On-Chain Markets Update by IntoTheBlock
This Week: Key Insights Behind UNI’s Distribution
Uniswap users received a pleasant surprise last Thursday when the popular DEX distributed 15% of their UNI governance tokens to all users that interacted with the protocol prior to September 1st. At an initial price of approximately $3, Uniswap airdropped $450 million worth of UNI tokens.
While airdrops in crypto are nothing new, this has thus far been the airdrop where the largest dollar amount has been distributed. Another key difference versus airdrops that took place in 2017-18 is that UNI was distributed to existing users and supporters of Uniswap, whereas most airdrops simply reward holders of another token or users of a specific wallet.
By analyzing on-chain data we can better understand the impact UNI has had on the Ethereum blockchain and on the protocol itself. With that in mind, here are three key insights that highlight the magnitude of Uniswap’s UNI distribution:
1. Ethereum Fees Approached $1M/Hour as ETH Transactions Soared
Ethereum fees have been on an uptrend in 2020, especially since yield farming took off in the summer. UNI’s distribution took this to a new level with Ethereum fees approaching $1 million per hour shortly after users were able to claim their free governance tokens.
Within 5 hours, hourly fees nearly went 10x from just over $100,000 to over $900,000. This is the highest Ethereum fees have been on a per hour basis all year.
The spike in fees is due to high demand for limited Ethereum blockspace. As a result gas fees stood between 500 to 700 Gwei for several hours, also one of the highest levels seen all year.
Despite the high fees, Uniswap users still rushed to claim their UNI tokens. This is likely the main reason why the number of ETH transactions surpassed 1.3 million the day UNI was released.
The UNI distribution marked a new yearly high in terms of Ethereum transactions, and the second highest level seen all-time. Now let’s look into activity within the UNI token.
2. UNI On-Chain Volume Surpassed $2 Billion While Exchange Inflows Rose
Given UNI’s high valuation, it made sense that transaction activity and fees spiked upon its release: the value of 400 UNI (~$1,200) was significantly higher than the $10-$20 in gas costs required to claim it. This is reflected in the high transactions volume UNI has processed since its inception:
Within 48 hours, UNI’s on-chain transaction volume had already surpassed $2 billion. Volume recorded off-chain was also massive with UNI 24-hour volume surpassing that of Bitcoin in Binance on September 18.
With Coinbase and Binance listing UNI within hours, a significant amount of holders transferred their tokens into exchanges:
Given that UNI’s price more than doubled on its second day, it may come as no surprise that inflow volumes also increased. This is likely an indication that many holders were looking to sell their UNI.
3. UNI Becomes 2nd Most Held DeFi Token Despite Most Addresses Selling
By looking at the number of addresses holding UNI we observe that it instantly attained widespread distribution. With over 80,000 holders within 48 hours, UNI became the second most held DeFi token only behind LEND (excluding stablecoins and oracles).
Based on Uniswap’s official announcement, there were just over 250,000 user addresses eligible to claim their free UNI. Although some of these addresses have yet to claim their UNI, it appears that most simply sold. By looking at zero balance addresses — addresses that transferred out all of their tokens on a given day — we can confirm that most UNI claimers either sold or transferred all of their stake immediately.
With $450 million worth of tokens freely distributed to previous users, it may come as no surprise that UNI sparked high Ethereum fees and transaction activity. Within a week of its inception, UNI has already amassed strong transaction activity and reached the second highest holder base out of DeFi tokens despite most users selling their tokens. Ultimately, though, Uniswap’s UNI release has been one of the most impactful events to occur in Ethereum in 2020.
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About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.