Vader Protocol: A Unique Protocol in Algo Stables
One of the lease understood aspects of crypto markets is the importance and size of the stable coin market The top 5 on CMC are stables $USDT and $USDC. And just look at the Curve Finance wars
In the stables market, the biggest story is the growth of algo stables, particularly with Terra Money and its algo stable $UST and native token $LUNA
$UST has an $11bn market cap
With the recent chaos with Wonderland and depegging worries of $MIM and $UST, it is timely to review one of the most unique algo stable projects still in early stages of development, Vader Protocol, building the first algo stable on $ETH ( $USDV )
Vader Overview
Vader Protocol is seeking to build a better & more stable version of UST on ETH by combining 3 DeFi innovations:
Slip Based Fee AMM w/ ILP ( THORChain )
Protocol Owned Liquidity ("POL") ( OlympusDAO )
Algo Stable Burning Mechanism ( Terra )
$VADER is combining these 3 innovations to build an AMM with incentives for deep liquidity:
LPs are protected against IL & earn yield
POL to allow for long-term liquidity
Vader's stable $USDV is the base asset, similar to how $RUNE is the base of THORChain
It is an ambitious idea with huge potential
If the team is able to create a liquid algo stable with a successful AMM & IL protection, the demand for $USDV will be strong and the stability of the peg should be as good or better than $UST
Project Execution
The team has been successfully executing on its roadmap:
code4rena audit ✅
2 bond sales for VADER-ETH LP on $UNI ✅
Single sided $VADER staking & governance ✅
Algo stable coin release ✅
All following the 1H 22 roadmap
Just recently, the Vader team released the $USDV stable on 1/28
They are slowly minting $USDV with $VADER until there is strong liquidity & the peg is stable
Deploy -> Review -> Scale
Within the first 20 minutes of launch, 50mm $VADER tokens were burned for $USDV (~$2.6mm) And now, $USDV is supported on CurveFinance
Project Plans
With the $USDV launch, soon they will launch the AMM which will drive even more $USDV demand
This will be a huge milestone for the protocol (deployment estimate Mar 2022)
Once the AMM launch, it will be important to build partnerships and deploy cross chain onto alt L1s ( $FTM, $AVAX, etc) and L2s such as Polygon & MetisDAO
The first of many partnerships is with AphraFinance where $VADER holders can claim a $APHRA airdrop
Even the AphraFinance founder is incentivized with $VADER
Comparison to Terra
One aspect makes Vader unique compared to Terra is that Terra relies on the 20% APY it offers to $UST stakers to drive demand of its stable
If that yield disappears, there is risk of $UST market cap dropping and ultimately $LUNA
$VADER does well if $USDV is adopted, not if there is an artificially high yield paid to $USDV holders
A much more sustainable path where offering deep liquidity & IL protection incentivize use of the AMM and demand for $USDV
Tokenomics
Similar to $LUNA / $UST, the tokenomics are such that $VADER does well if more $USDV is minted since $VADER is burned to create more $USDV
And right now, $VADER tokens are burned for $USDV 6.6-to-1 compared to $VADER emissions
And with the AMM launch, even more $USDV will be needed, aka $VADER burned
Current tokenomics with current market cap of $260mm and FDV of $1.5bn
Time will tell if this delta between mkt cap & FDV converges as $VADER tokens are burned
Conclusion
If @VaderProtocol is successful, there is plenty of room to run for $VADER with the $LUNA / $UST combined market cap of ~$30bn
@VaderProtocol has a unique value proposition in the algo stable space
There is desperate need for a decentralized stable on the ETH Virtual Machine
And $VADER's innovation can provide an algo stable with deep liquidity and peg stability for this need NFA