WAND Investments — a low risk passive income opportunity
During the bull market the sky was the limit for DeFi projects offering passive income. Unfortunately the bear market showed that they were mostly unsustainable. WAND Investments was designed to be profitable regardless of the market sentiment, making it an interesting low risk opportunity for investors.
WAND Investments designed two tokens (Scepter and Baton) for you to invest in, each providing returns in a different way.
Scepter
Scepter is a token that will always increase in value. This is possible, because the price is based on the value of the Scepter treasury, which should be ever increasing. Scepter can be minted with stable coins, which then get transferred to the treasury.
Price calculation
The price is calculated with the following formula:
Treasury value / total number of tokens
So if the treasury is worth $10,000 and there are 100 Scepter tokens in circulation, the price of one Scepter token is $100 (10,000 / 100 = 100).
Price growing mechanisms
To increase the price of Scepter, various mechanisms are designed.
1. Taxes
Both buys and sells get charged with a dynamic tax that are added to the treasury. These taxes consist of a fixed percentage in combination with a variable factor.
The buy price is calculated as follows:
Scepter price * (1.2 + growth factor)
The formula for the growth factor is:
2 * (number of tokens bought over the last 5 days / total number of tokens existing 5 days ago) and capped at 0.3
So the buy price consists of a fixed tax of 20% and a dynamic tax with a cap of 30%.
The sell price is calculated as follows:
Scepter price * (0.9 - growth factor)
The formula for the growth factor is:
2 * (number of tokens sold over the last 5 days / total number of tokens existing 5 days ago) and capped at 0.3
This means the sell price consists of a fixed tax of 10% and a dynamic tax with a cap of 30%.
Lastly there is a lock-up removal tax. Normally there is a ten day lock-up period, because the treasury is used for investments and needs to be withdrawn. This lock-up can be removed by paying a 10% tax.
2. Investments
The Scepter treasury will be used for low-risk investments like stable coin farming.
There’s also a risk treasury which was financed by a pre-launch seeding round. This will be used for high risk investments and a part of the rewards will be transferred to the Scepter treasury.
3. Baton minting
Baton can be minted by burning Scepter. Once Scepter is burned, 10% of the value remains in the Scepter treasury.
Example of price increase
I’ll demonstrate how the price of Scepter increases from these mechanisms by showing an example of a buy. Again let’s assume the current price of Scepter is $100 and the treasury is worth $10,000. If the dynamic tax is at its cap, the buy price would be $150 (100 * 1.5). If I were to buy 10 Scepter, it would cost me $1,500.
Now the treasury is worth $11,500 ($10,000 + $1,500) and the total number of tokens is 110 (100 + 10). That would lead to the following price:
11,230 / 110 = 104.55
Baton
Baton is a reflection token that rewards its holders with weekly USDC airdrops.
Treasury sources
Baton has its own treasury, which is fueled by two sources:
1. Baton minting
Baton can be minted by burning Scepter. Doing so transfers 90% of the stablecoins backing the burned Scepter to the Baton treasury.
2. Investments
The majority of the Baton treasury is used for low-risk investments. A small percentage will be used for medium-risk investments.
The Baton treasury will also benefit from the rewards generated by the Risk treasury. 33% of these rewards will be transferred to the Baton treasury.
Distribution
The rewards of the treasury are distributed as follows:
45% is compounded
45% is airdropped to holders
10% goes to the developers
Conclusion
I found out about WAND Investments months ago and ever since I have been impressed with both the whitepaper and the team. The protocol is relatively low-risk and revolves around sustainability. During a bear market that is primarily what I’m looking for.
My initial strategy will be to mint Scepter and then hodl. I expect that the combination of farming rewards and taxes will result in a decent price increase. At this point I cannot predict how many people will burn their Scepter to mint Baton, so I’m not sure how much that will contribute to the price increase of Scepter.
Speaking about Baton, I will not mint any until I know what kind of APR I can expect. Minting Baton (and thus burning Scepter) will lead to me losing liquidity, which I cannot comfortably do without knowing the reward for doing so.
The team behind WAND Investments also discourage investors from minting Baton during the first two weeks after launch:
We urge SCEPTER holders to wait at least a week or two before burning their SCEPTER to mint BATON (should they want to), in order to have a larger BATON treasury and larger airdrops.
If you are interested in learning more about WAND Investments, I recommend you to read their whitepaper. This article contains an overview of the two tokens and their mechanics, but does not contain all the details that the whitepaper does.
Also be aware that although WAND Investments is a relatively low-risk investment, it’s not without risk.
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