Exploring the Utility Race in Decentralized Finance
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In recent months, discussions surrounding various DeFi projects have undergone a noticeable transformation. The initial excitement has shifted toward a more cautious outlook, as investors seek real utility in decentralized finance rather than merely speculative returns.
Previously, the narrative celebrated DeFi's triumph over centralized finance, with fervent supporters witnessing substantial gains across various projects, both reputable and lesser-known.
Today, however, the atmosphere is marked by uncertainty, inflation, economic downturns, and bearish market trends. The once-celebratory tone has transitioned to a more reflective stance on the decline of established assets and the overall market health, fueled by Fear, Uncertainty & Doubt (FUD).
The sentiment has evolved. While many still believe in DeFi's potential (myself included), the blind devotion has matured into a more discerning perspective on what constitutes a truly promising DeFi project.
In this article, I will outline my thoughts on why the focus has shifted toward utility and clarify that not everything that appears valuable actually is. My primary focus will be on the search for genuine utility within passive income projects, particularly Daily ROI DApps. I will strive to remain objective, even if it proves challenging.
What are Daily ROI DApps? For this discussion, they refer to Decentralized Applications where users acquire tokens, deposit them without withdrawal options, and receive a daily percentage of their deposit. By compounding these returns, deposits can grow significantly, potentially multiplying daily payouts exponentially over a year.
I will delve into three DApps that I believe are solid choices, each with reputable teams: DRIP, Ooze Finance, and Furio. (Click the links to jump directly to the utility discussion for each project if you prefer not to read the entire piece).
These DApps share a common framework of taxation and incentives designed to encourage holding and compounding. While they differ in specifics, the core principles include taxing deposits (for example, a $1000 deposit might only allow for $900 to be claimed), capping claimable tokens, taxing all transactions (whether compounding, claiming, or selling), and shaping investor behavior through referral incentives and a preference for compounding over claiming.
Sustainability Insights
The original Daily ROI DApp, DRIP, incorporates these sustainability features. Having been active for approximately 18 months—an eternity in DeFi—it has proven lucrative for long-term participants. Despite significant declines from its all-time high, DRIP has maintained relative stability over recent months, suggesting its ongoing viability.
New entrants like Ooze Finance and Furio have introduced additional sustainability and incentive mechanisms.
Ooze Finance boosts sustainability by linking maximum balance allowances to deposits. To access the maximum claimable amount, users must either start with a substantial deposit or continually contribute additional funds. This model encourages growth while requiring ongoing investment. Additionally, the innovative Ooze NFT serves as a certificate of deposit that can be upgraded through community-beneficial actions, making deposits transferrable and sellable. This unique approach enhances sustainability by ensuring that funds are not directly traded for stablecoins, which could deplete the contract.
Conversely, Furio does not impose size restrictions on deposits to reach maximum claimable amounts. Instead, it discourages claims through a variable daily ROI tied to compounding frequency. Users who consistently compound can achieve a remarkable 2.5% daily ROI, while those who claim see their returns diminish to 0.5%, with no possibility of returning to a higher rate. To maintain an average ROI that aligns with potential returns, users must either compound every day or use an autocompounding option, which incurs additional transaction fees. Currently, Furio's system appears robust, favoring compounding over claiming. However, its long-term sustainability remains uncertain.
The Need for Utility
Why is utility so critical? These DApps heavily rely on user behavior and taxation for funding. Fresh investments are taxed, and this revenue is utilized to distribute daily ROI. Although these systems can sustain themselves through user behavior and market sentiment, they ultimately require continuous fresh capital to remain viable. If users primarily choose to compound, the available tokens for purchase may dwindle, driving prices up as new investors enter. Conversely, if fewer users join and more choose to claim, the available tokens increase, leading to price declines. The notion that Daily ROI DApps can function indefinitely solely on taxes is flawed; capital is essential for these passive income engines to operate effectively.
What about Furio? Some may argue it's exceptionally sustainable, prompting thoughts of implementing a Liquidity Management System (LMS) right now. While I believe Furio has a capable team, the severe disincentives for claiming could lead many investors to remain in the 2.5% ROI bracket without withdrawal.
To illustrate, if you invest in 100 Furio tokens today (~$680 USDC at $5.5 per token), earning a 2.5% daily interest, your holdings could soar to approximately 9000 tokens (~$50,000 USDC) within six months. A year later? You could possess around 820,000 tokens (~$5.5 million), far surpassing the 27,778 tokens needed to reach the maximum claimable limit.
What happens as early investors approach significant token holdings? They may exit the high-ROI club, leading to withdrawals that could strain the system. Even with a new claiming schedule, their daily ROI might drop, but they would still extract more value than they initially invested, amplifying concerns about sustainability.
The LMS is posited as a stabilizing force, but its effectiveness could falter if the demand dwindles and other investors start selling off their holdings. Such a scenario could trigger panic and further price drops. The continued viability of the LMS hinges on maintaining sufficient utility to attract fresh capital.
What constitutes utility? I do not consider implementing an LMS, behavioral conditioning, or liquidity pools as forms of utility. Genuine utility involves developing products that extend beyond mere daily returns. The three projects discussed—DRIP, Ooze, and Furio—each have promising products in development that I view as true utility.
DRIP's Utility
For DRIP, the anticipated relaunch of Animal Farm is approaching. Scheduled for October 18th, this initiative is touted as the first decentralized ownership lending and yield aggregating protocol in the DeFi space. Users can earn "pigs" (AFP tokens) by providing liquidity with DRIP or Animal Farm Dogs (AFD). This system allows participants to maintain ownership of their assets while generating dividends.
The success of Animal Farm serves as a beneficial use case for DRIP, as supplying liquidity can reduce circulating supply and, consequently, upward price pressure.
Furio's Utility
Furio is pursuing a different strategy. Their recently launched FurBot allows investors to stake in a trading bot, represented by limited NFTs. Profits generated by the trading bot will be distributed to NFT holders and used to support the LMS. While promising, the sustainability of trading bots remains debatable, as the market could become saturated with such options.
Additionally, Furio is developing FurBet, a gaming platform that includes an online casino and sports betting. This initiative aims to attract a broader user base, with a share of profits returned to the Furio ecosystem.
Ooze's Utility
Ooze Finance is currently navigating challenges, facing skepticism about its price trajectory. However, it has several projects in development that could offer significant utility: Rafflez, WalletGram, and 0xchange. Each project presents real-world use cases beyond the daily ROI DApp.
Rafflez is a raffle game where a substantial portion of ticket sales returns to players, providing an enticing incentive structure. WalletGram aims to serve content creators, allowing them to retain a larger share of revenue without the interference of traditional intermediaries. Lastly, 0xchange offers a wallet-to-wallet messaging system that enhances user engagement within the Ooze ecosystem.
In conclusion, I believe that Ooze Finance has the most compelling plans for utility, which could lead to a revitalization of its price trajectory. The combination of various projects may create a sustainable revenue stream to counterbalance existing user behavior.
I am optimistic about the future of Daily ROI DApps that prioritize utility and can weather the current bear market. As savvy investors know, it's wise to invest before significant news breaks and to buy during downturns. If you're interested in one of these projects, read on for guidance on how to get involved, and consider using my referral link!
Ooze
DRIP
To begin with DRIP, ensure you have BNB on the Binance Smart Chain (BSC) in your wallet. Visit the Drip Fountain to swap BNB for DRIP. Once you have DRIP in your wallet, head to the Faucet to deposit! Congratulations—you are now a dripper! If you plan to create your own team, you will need some bREAP tokens (available on PSC v1).
My referral address: drip.community/faucet?buddy=0x94b78AE327f950962611A712F788990584785dB9
After depositing funds in the faucet, I highly recommend visiting the Cryptozoa Drip Lounge Gateway, where you can verify your status as a downline of a Cryptozoa Buddy and gain access to the best DeFi community.
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Disclaimer: Nothing in this article should be interpreted as investment advice. Neither the author nor the publication bears any responsibility for any profits or losses incurred as a result of this information. This article may contain affiliate links.