Five bullet Friday - issue #54

Dear Partners,

 Our fund performed much better in the month of August than July. Most of the gains came from our holdings in YFI. We currently own 429 tokens, which is the same as owning 1.4316% of the protocol, out of a supply of 29,966 YFI tokens. This entitles us to 1.43% of the earning of this protocol in perpetuity. It is impossible for anyone to dilute our stake.

1. This week I have added more to our position in Synthetix. We have added an additional 165,000 new SNX tokens to our portfolio. Every time I add to our Synthetix position, note that our debt also goes up. The word, 'debt' is definitely scary. It is an amount of money that we have to send to the smart contract in order to unstake our SNX tokens. As long as I increase my SNX position, remember that our debt will also grow. In April our debt was close to $10,000. But now, as the value of tokens is going up and I am constantly minting new SUSD tokens. Currently it is over a million dollars.

2. This debt does not accrue any interest. It is simply an amount that we owe to the smart contract. For every $600 worth of SNX the system allows us to mint $100 of SUSD. This $100 is used by traders around the world to trade. We collect fees from their trading.  Synthetix protocol enforces this collateralization of 600% to the outstanding debt. All the proof-of-stake miners are required to maintain this ratio. If this ratio drops down to say 550%, then I need to buy new SNX tokens in the market. If I don't restore this ratio, I will lose the ability to collect income. If we want our weekly income, I have to keep up the ratio. SNX price dropped from $7.8 to $5 very fast. The only way I can fix this is by buying more SNX tokens in the market to restore my collateralization ratio. I expect the debt to grow continuously as long as we hold SNX. 

3. I am seeing huge growth in all DeFi Protocols. People dislike the centralized exchanges as they are getting hacked all the time. In January 2020, the decentralized exchanges were only taking 0.4% of the volume traded on centralized exchanges like Binance or Kraken. Today this number is close to 6%. That shows superb growth. All these decentralized exchanges use Graph protocol. In January it was barely getting 10 million queries per day. Today it is over 200 million queries a day.  YFI had a volume locked in the smart contract at $7.4 million on July 18th. Today it is well over $960 million. This trend is only going to grow, as Decentralized Exchanges are much more robust and very convenient for users as they cannot be hacked.

4.  We are actively engaging in proof-of-stake mining with Synthetix. Synthetix will pass the trading fees (0.3%) generated on the exchange to the token stakers. This week we have generated a staking income ( 499.19 SUSD + 3446.86 SNX * $5.63  )  totaling $19,905. The value of the staked SNX  (591234.80) is $3,328,651 at a price of $5.63.  This gives us a yield of 19905 / 3328651, which is 0.5979% per week. If we annualize the yield by (1.005979)^52,  it results in a yield of 36.34% APY.  This can be seen directly from this website here:https://docs.google.com/spreadsheets/d/1QU47tR4eK0fD2ySaP88LM9U46vD7p6mt80KSfqu00DI/edit#gid=366963260  on the SNX tab. We currently hold 656,479 tokens of Synthetix.  

 
5. We are generating good income from our dark nodes running for REN protocol. This week we collected $816 in new tokens as our toll-booth fees. The full report can be seen here:https://docs.google.com/spreadsheets/d/1QU47tR4eK0fD2ySaP88LM9U46vD7p6mt80KSfqu00DI/edit#gid=982608609. REN protocol had close to zero transaction volume on June 1st. Today it is close to $457 million. I am impressed with their growth and it still has a long way to go. So far there are exactly 1197 such dark nodes collecting transaction fees.

Have a wonderful weekend!