This article comes from Banklesshq, Original author: Ben Giove, compiled by Odaily translator Katie Koo.
This article comes from
, Original author: Ben Giove, compiled by Odaily translator Katie Koo.
Tribe now has a decentralized stable currency, an innovative lending market, and a plan to bring other game projects under its umbrella, while sitting on hundreds of millions of dollars in encrypted assets, leaving only the DEX field that has not yet "touched".
But Tribe doesn't get much attention in the crypto market, and I can't help but wonder; "Is Tribe undervalued?"
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merged forces
While the prices of DeFi tokens have dropped significantly, many protocols have improved volatility through solid competitive positioning and influence thanks to their control of diverse asset reserves.
Sitting on over $600 million in capital, Tribe will become a force within DeFi after combining Fei Protocol’s stablecoin with Rari’s independent lending marketplace. Additionally, each protocol has withstood important tests early on, such as Fei’s post-launch decoupling and Rari’s development, proving their resilience and ability to withstand the rigors of DeFi.
How much is the project token that manages such a volume of funds worth?
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1. Fei Protocol
Overview of Tribe DAO
I will introduce the four child DAOs in Tribe DAO separately.
A key feature of PCV is that it is composed entirely of decentralized assets, consisting of ETH, decentralized stablecoins, and DeFi governance tokens.
Source: Dune Analytics
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Source: Dune Analytics
Although Fei Protocol initially used mechanisms such as direct incentives to achieve stability, Fei has largely broken the mechanism of pegging to the U.S. dollar after its launch. This prompted significant changes to Fei’s design, such as the removal of direct incentives, and eventually the introduction of Fei V2.
2. Rari Capital
Another service Fei offers is Liquidity Funding Services (LAAS). LAAS has partnered with Ondo Finance to help DAOs reduce their liquidity costs by providing them with the ability to lease tokens, as DAOs that deposit their native tokens into Ondo's LP (Liquidity Provider) pool will see their matching amount of Fei . Fei earns a fixed fee based on the amount of liquidity provided, while the benefit DAO is entitled to all transaction fees and bears the temporary risk of loss.
The second major sub-Dao in Tribe is Rari Capital. Rari is best known for Fuse, which lets anyone create their own independent lending marketplace. Fuse is the third largest money market protocol on Ethereum with over $789 million TVL (Total Value Locked).
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Source: DeFi Llama TVL Data Pad
Fuse is highly malleable and has more functions than existing protocols. For example, administrators can change a large number of mining pool parameters, such as choosing their own oracle provider, and Dao can start the liquidity mining program from the Fuse mining pool by using a feature called Flywheel, allowing users to earn rewards while At the same time, loans are made against their LP (liquidity provider) positions.
As previously mentioned, Rari facilitated the creation of the Tribe DAO through its merger with Fei. This is the largest transaction of its kind in DeFi history. The transaction will be executed in such a way that holders of Rari’s native governance token, RGT, will be able to trade their assets to the Tribe at an exchange rate of approximately 26.7 Tribes per RGT. While some community members were initially apprehensive, the merger received overwhelming on-chain support.
The synergies brought about by the merger have already begun to emerge, with many Fuse mining pools already implanted with Fei’s liquidity, and the upcoming Tribe Turbo will leverage the capabilities of both Fei and Fuse.
3&4. Volt Protocol and Midas Capital
The first is Volt Protocol, which is developing Volt, a stablecoin that tracks the growth of the CPI (Crypto Price Index, aka the Dow of the crypto world). The protocol utilizes Fei and Fuse in its design and launch mechanism and will be governed by the VCON token, 25% of its supply will be owned by the Tribe DAO.
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1. Protocol Controlled Value (PCV) Store Assets
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Source: Fei Analytics
Tribe DAO can deploy its PCV to earn yield, or use it to create Fei, called Protocol-Owned Fei (POF).
Like PCV, POF can be deployed in ways that are of strategic interest to the DAO, such as generating cash flow by earning additional yield and strategically channeling liquidity between different fuse pools and AMM pools.
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Source: Fei Analytics
Although below the November 2021 high, PCV is currently valued at $662 million.
In addition, the emphasis on these assets can also improve the utility of PCV and the opportunity to obtain income, because these two sets of assets are the most widely integrated in the entire DeFi protocol.
This large and growing store of assets will help Tribe DAO become the king of DeFi and allow them to exert significant influence over yields and liquidity flows.
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2. Vertical integration
Essentially, "controlling the stack" means that the DeFi protocol, or DAO mafia, can influence interest rates, liquidity flows, and create its own autonomous financial system without relying on any third-party protocols. This could greatly increase Dao's long-term survival chances and greatly improve their competitive positioning in the increasingly competitive and rapidly changing DeFi environment.
Although Tribe DAO does not currently have its own AMM, it has established a close connection with an AMM through its close connection with Balancer. In addition to plans to leverage the DEX to manage the Protocol Controlled Value (PCV), Tribe DAO and Balancer executed a $9 million token trade in November 2021. This will likely keep the two protocols close together for the foreseeable future, helping to fill the “AMM gap” in Tribe DAO.
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3. Human Capital
Both Fei and Rari had successfully built a product-market fit prior to the merger, with Fei's market capitalization at $756 million, more than double the all-time low set in July 2021, and Rari's TVL at the time of the acquisition proposal. At that time, it was 1.16 billion US dollars. This demonstrates the strong development, business and community building capabilities of both teams.
Furthermore, given the innovation Fei and Fuse bring to the table, and the ability of these two teams to continually release new features and products, it seems likely that the DAO and the community will be able to adapt to the fast, ever-changing DeFi environment.
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4. Partnerships and collaboration
This demonstrates that Tribe DAO is highly collaborative, capable of forming strategic and mutually beneficial partnerships within DeFi. Given the growing value seen in DAO-to-DAO partnerships, and the fact that one of the core DeFi value propositions is composability, Tribe is less likely to be disadvantaged.
token economy
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token economy
Just as "stocks are not business" in the traditional stock market, "tokens are not agreements" in the encryption market.
Let’s take a look at Tribe’s token economy and see if it can avoid a similar fate.
Token Distribution Mechanism
Source: Tribe distribution mechanism article on Medium
As we can see, Tribe's initial distribution is highly fragmented, with only 18% going to the team and early investors. The distribution between these two groups is significantly lower than many other DeFi protocols, with Genesis participants alone getting twice as many distributions as private round investors.
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Source: Tribe distribution mechanism article on Medium
Additionally, Tribe benefits from the precondition of an excessively long vesting period, with investor and team tokens vesting over 4 and 5 years respectively. Additionally, team allocations are reverse-weighted, meaning token holders will have to absorb initial inflation in the early days of the protocol.
The combination of this fairer token distribution and longer redemption time suggests that Tribe DAO is a highly long-term oriented one and will likely make decisions that emphasize long-term stability and sustainability.
Token Usage
Tribe plays two key roles in both Tribe DAO and Fei Protocol:
the right to govern
protocol support
Like most DeFi tokens, Tribe as a whole is used for governance within the DAO, with holders being able to vote on various items such as PCV allocations. However, Tribe also holds micro-governance rights over the assets held in the DAO treasury or PCV, and AAVE, ANGLE, BAL, COMP, CRV, CVX, INDEX, and TOKE constitute the tokens that can exercise these rights.
Tribe DAO is one of the pioneers of micro-governance in DeFi, as they are known for utilizing INDEX micro-governance to help meet the threshold for Fei to be listed on Aave. Although these tokens represent only a small fraction of the protocol's control value (PCV) relative to ETH and stable assets, Tribe's extensive microgovernance rights may be valuable to Dao in the future, increasing the token's popularity among such buyers. attraction.
The second major use of Tribe is to provide protocol support for FEI. Similar to MKR's role in MakerDAO, if Fei is under-collateralized, Tribe is minted, redeemed from PCV, and re-collateralized the protocol.
Supply and demand dynamics
Tribe's primary demand driver and value accretion mechanism is buybacks, as 20% of the "protocol equity", the value of the PCV, if all Fei is redeemed as its underlying collateral, will be allocated to weekly purchases of Tribe, these Tribes are distributed back to the protocol library.
In addition to helping incentivize PCV's growth and management accountability, these buybacks should contribute to a source of acquisition pressure for Tribe. To date, more than $13.28 million worth of repurchases have been executed.
While there is a risk of permanent major inflationary shocks if Fei is under-collateralized, Tribe is currently only released through liquidity mining of “Fei-Rari”, a Fuse pool operated by the Tribe DAO. Although this may put selling pressure on the token as it is mined by prolific miners. But in the long run, due to the size of the Protocol Control Value (PCV), the protocol is well positioned to avoid dependencies and possibly eliminate emissions altogether.
As it stands, Tribe’s token economy seems to be very favorable for investors, especially compared to the wildly inflationary token economy in DeFi.
Finally, Fei Protocol co-founder Joey Santoro proposed a token economic improvement that has the potential to further improve supply and demand dynamics.
Discounted cash flow valuation (DCF Valuation)
Now that we understand Tribe DAO's product, competitive advantages, and token economics, let's take a look at Tribe DAO's financials and try to value it using the Discounted Cash Flow (DCF) model.
There are three main sources of Tribe DAO's cash flow:
Protocol-owned Fei (POF) yield earned by distributing Fei across DeFi protocols.
By similarly deploying these assets into various DeFi protocols, gains in Protocol Control Value (PCV).
The platform fee earned from Fuse is generated by taking a cut of the interest rate difference paid to depositors and lenders.
The model attempts to forecast the growth of the Fei stablecoin and Fuse as a means of estimating the cash flows generated by these three sources.
The model used a discount rate of 35%, which is in line with the average range in which venture capitalists value start-ups. In addition, the model uses a terminal growth rate of 2% to track the expected growth rate globally.
The model assumes that the stablecoin market will grow by 227% over the next five years at an increasingly slower pace. Considering the previously mentioned competitive advantages, Fei Corporation is the beneficiary and is expected to grow its market share as the size of PCV grows proportionally over the next four years.
The model also predicts that by deploying to AMMs, lending markets, and liquidity staking services, the DAO will be able to earn an initial yield of 5% on protocol-owned Fei and 3% on PCV, which is expected to Will decrease as the protocol size expands.
The model projects that the lending sector of Ethereum L1 and L2 will grow by 556% at a slowing annual rate over the next five years. Considering the addressable market for all assets in DeFi, Fuse is expected to capture an increasing market share in the industry (this model does not take into account Midas Capital’s capital deployment).
By adding up the total cash flows generated by both protocols and discounting them to the present, we calculate Tribe's fair value to be between $1.63-$3.52.
At the current price of $0.58, this represents an increase of 207%-564%.
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risk assessment
1. Competitiveness
Competition in the stablecoin space is fierce, with 24 companies having a market cap of more than $100 million and nine companies with a market cap of more than $1 billion. Given the large addressable market in this segment, competitiveness is unlikely to weaken in the foreseeable future.
Competition is equally fierce in the siled lending market, with emerging protocols like Euler Finance and Silo Finance seeing investor interest. Additionally, the recently launched v3 of Aave also includes some standalone lending features, further muddying the competitive waters.
2. Protocol Control Value Risk (PCV Risk)
As mentioned earlier, Fei's PCV (Protocol Control Value) is stored via a variety of different protocols. While risks are spread across these protocols, if one or more protocols are exploited, or if DeFi suffers a major systemic event, a significant portion of PCV could be lost, leaving Fei and the multiple Fuse pools it deposits at risk of undercollateralization.
3. Emissions
Stablecoin issuers, and DeFi in general, could face a crackdown from regulators. Although Tribe DAO employs fully decentralized on-chain governance, it still faces the risk of being scrutinized by government agencies looking to rein in DeFi.
Summarize
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Summarize
With two innovative protocol offerings, Volt Protocol and Midas Capital, a huge protocol-controlled store of value (PCV) asset, and led by a strong group of contributors that are constantly building, issuing, and trading, Tribe DAO seems poised to become a DeFi black hand Party, come out of this bear market.
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