MistSwap Ecosystem fundamentals: why xMist and xLNS are amazing

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Avatar for mortinp
2 years ago

TLDR; You want to have xMist and xLNS when SmartBCH grows, because these tokens feed on transactions volume of several activities in SmartBCH.

Disclaimer: I am not a tokens trader and when I've attempted it, it has gone really bad. I almost never buy a token; I'd rather farm to earn and accumulate what I like despite the price. I haven't bought Mist/xMist and have only bought some LNS, but I'm accumulating Mist/xMist by providing liquidity in MistSwap and will keep buying LNS when I see fit. This is not financial advise, always do your own research.


I've been thinking for a while about sharing my understanding of the MistSwap vision, until now, that I finally decided to share it formally after the great news of .bch domains being integrated into the Electron Cash wallet.

But let's start from the beginning, which is actually the core of all of this.

The case for xMist

Take a look at this chart:

Mist Ecosystem of products rewarding xMist holders

These are the facts that chart states:

  • Farms in MistSwap collect 0.05% of all swaps volume and keep it as LP tokens that are used to buy Mist and reward xMist holders.

  • 35% of all LNS is staked in behalf of the xMist holders forever, and all rewards from this staked LNS (xLNS) is used to buy Mist and reward xMist holders.

  • The Bridge collects 0.3% of the total amount bridged (for non BCH bridging) to be used to buy Mist and reward xMist holders.

  • The coming Lending Protocol will certainly use some % as fees to be used to buy Mist and reward xMist holders.

That chart presents Mist exactly as I envision it: an ecosystem of very diverse products that, besides the services they provide to their users, have the purpose of rewarding xMist holders.

So, as a xMist holder you're holding shares on a collection of products that, together, absorb a huge part of the activity in SmartBCH: they get swaps volume from the DEX, purchase and renovation volume from .bch domains sales, borrowing activities volume from the lending protocol and volume from tokens bridged in and out of SmartBCH.

We will call that ecosystem of products the Mist Ecosystem.

All the products in the Mist Ecosystem are core financial and useful products that tend to have a lot of activity in any blockchain. We can expect total volume absorbed to be huge when counted together.

However, the greatest realization from the chart is this: the Mist Ecosystem feeds from activity in SmartBCH. The bigger the activity (swaps, lending/borrowing, assets bridging, etc.), the bigger the value captured by the ecosystem.

Products in the ecosystem are designed in a way that each tackles an important market or activity, and all end up rewarding the shareholders of the ecosystem.

A big part (arguably most) of that value is distributed to xMist holders.

Quick sidenote:
As the graphic above shows, the Mist ecosystem is conceived in a way that there is room for any other product that can potentially absorb a good chunk of activity volume in SmartBCH.

Having understood that holding xMist is holding shares in the Mist Ecosystem, let's now take a look at some numbers and then project a bit into the future.

Mist staking APY

If we have been following MistSwap Analytics, we would have realized that the average APY for Mist staking has been moving from 12% to about 20%. This range is due to the price of Mist fluctuating over time, since the APY is relative to the price of the Mist token.

You can check that APY here: https://analytics.mistswap.fi/bar
At the moment of writing, the APY for Mist staking is 25.88%.

For our analysis, let's take a conservative and round number. Let's calculate with 10% APY (this number is good because it is very conservative. So far avg. Mist staking APY has been beating that number).

But this APY that Mist Analytics shows is actually NOT the actual APY that xMist holders are getting.

This number is NOT measuring the rewards coming from the bridge and from the LNS service.

So, we can expect this number to be higher. But how much higher?

We still don't have analytics for LNS (we'll leave the bridge outside discussion), but we do have this chart Kasumi shared about a month ago (on April 7th, 2022):

Kasumi shared that chart here: https://t.me/MistSwapOfficial/27704

Visually, the chart shows LNS rewards added almost a 2x compared to measuring MistSwap DEX fees only. This means, if that ratio is sustained, LNS is actually doubling the APY for xMist holders.

So, let's take that 10% APY from before and say we may actually be getting a 20% APY.

Isn't that awesome? We're probably getting 20% APY for ONLY staking our Mist!

If that doesn't seem like a lot, then let's project this thing into the future.

What if TVL in SmartBCH 5x? Like, what if we get to 100 million TVL? That doesn't seem like a crazy goal.

The easiest way to project this is to assume Mist would capture an equivalent percent of the total volume in SmartBCH, but now based on 5x the activity.

That would give you 5x the current APY, which would turn that 20% APY into a 100% APY.

So, under the circumstances of SmartBCH growing 5x, xMist holders would theoretically be getting a 100% APY for only staking Mist!

Awesome stuff.

Quick sidenote:
The actual APY at that moment will probably be nowhere close to 100% APY, because Mist token's price would also go up. This APY is actually based on current Mist price, but gives you an idea of the growth you can expect if you held Mist now.

In summary:

  • Current Mist staking APY seems to be about 20% counting rewards coming from MistSwap DEX and the LNS service together.

  • If projected under a 5x growth in activity in SmartBCH, the APY could theoretically become 100% for Mist staking (holding xMist)

Let's now take a look at the LNS service, because it deserves to be looked into separately even if it has relation to xMist because it rewards xMist holders.

LNS for the masses: the case for xLNS

So, today (May 7th, 2022) the wallet Electron Cash launched an update that included the integration of the LNS service and, for the first time, allowed BCH to be transfered from one address to another using a .bch domain (I wonder to what domain was the first tranference made 0_0).

The most important part is this: we're talking about BCH in mainchain, NOT in SmartBCH.

This means that you can transfer BCH coins to an address like mortinp.bch instead of to qzytl...7hxnf, using the Electron Cash wallet.

And this is big!!! because for the first time the BCH network got a direct integration with its sidechain that resulted in something useful for all users. If BCH users only have one interaction with SmartBCH, it will probably be with the LNS service by setting a domain name for themselves. It's just a matter of convenience and it suits everyone, even those who won't consume other products in SmartBCH.

Now this has an amazing extrapolation and I'm going to say it quick:

The LNS service's total addressable market is all BCH users!

Read that again please, and think about it. The total addressable market of the LNS service in SmartBCH is the whole BCH userbase!!!

If you get only one realization from this article, I'd like it to be this one I just mentioned above.

Even if people who use BCH are not aware of SmartBCH or don't want to use their BCH in DeFi and dApps, they may be attracted by the HUGE convenience of having their own .bch domain for everyday use, and the only way right now is by purchasing a .bch domain using the LNS service in SmartBCH.

And that includes not only common people. It may include mega enterprises too, who will want to own their own domains.

I see .bch domains as an anchor of SmartBCH in the whole BCH community, and it may play out as a snowball. The more people start getting their own .bch domains, the more people will want to have their own, too.

What is the importance of all this for xLNS holders?

It's similar to being holding xMist but only norrowed down to the LNS service. Holding xLNS is holding shares in the LNS service and having rights for profiting from the protocol's income. It would be similar to owning shares in Goddady.

The more people purchase and renovate .bch domains, the more you profit from holding xLNS (staking LNS). And we already stated that the LNS service can be huge in itself.

And here's an additional thing about LNS: there only going to be 1 million of LNS tokens around, ever.

See LNS tokenomics here: https://docs.bch.domains/tokenomics

So, if we think of LNS as shares in the LNS Protocol, then there is only ever going to be 1 million shares for you to grab... and we know capped tokens that actually work are wonders ;)

As a reminder, the LNS service IS a product from the Mist Ecosystem, so it will, above everything, do what it's programmed to do: reward xMist holders (apart from rewarding xLNS holders themselves).

We will see exactly that in the next section.

xLNS and xMist get along together

Here is another chart:

LNS service rewards xMist holders

This chart shows something extraordinary, as it states 2 things:

  • The mere existence of the LNS service is, besides the service itself, to reward two types of shareholders in the Mist Ecosystem: xLNS holders and xMist holders.

  • xMist holders will get 35% of the total rewards for the LNS staking pool, which is equal to 35% of the total income of the LNS protocol, since all income is used to reward the pool.

You can see LNS tokenomics here: https://docs.bch.domains/tokenomics

Those statements are bigger than you may be thinking right now, because they have one cool implications I will let you know right now:

xMist holders getting 35% of all income from the LNS pool rewards means that xMist holders may be absorbing 35% of all income coming from the whole BCH userbase who will use LNS service to purchase .bch domains, because we already stated that LNS service's total addressable market is all BCH users.

Yup, that's right, xMist holders are effectively the owners of 35% of all xLNS.

Quick sidenote: xMist holders actually get rewards from 350k LNS tokens staked forever in the contract, which is 35% of all the LNS tokens that will ever exist, but not all LNS tokens have been minted yet. It will actually take 1 year before all are minted, so, effectively, xMist holders get MORE than 35% of the rewards at the moment of this writing.

If we talk numbers, let's get you something for you to fantasize with:

If you own 1% of the total xMist, you also own 0.35% of all Mist rewards coming from the LNS pool, which is the same as saying you can be earning 0.35% of all the money BCH users (including mainchain users) will spend purchasing and renovating domains!

So yeah, you indirectly and hugely benefit from the LNS service's profits by ONLY staking Mist.

(...)

Conclusions

As you can see, the Mist Ecosystem is a collection of very important products that will capture huge value from the financial activity in SmartBCH and will distribute that value to its shareholders: xMist holders.

I like to call these types of systems a blackhole, because they absorb a lot of energy or value. The Mist Ecosystem is definitely becoming and is meant to be one of the biggest blackholes in SmartBCH.

On the other hand, we saw that the LNS service (.bch domains) tackles a huge market, equal to all BCH users. The integration in the Electron Cash wallet is just the first window that got opened, but many more will follow.

xLNS holders get value from all purchases and renovations of .bch domains, and part of that value (at least 35%) is also distributed to xMist holders.

Here's my ultimate conviction: given SmartBCH grows, the MistSwap Ecosystem with its current products and others we may not imagine yet, will acquire a lot of value, will grow along with the whole chain and will bring huge value back to its shareholders and investors.

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Avatar for mortinp
2 years ago

Comments

Lovely presentation, I like MistSwap, it can grow a lot more together with Verse.

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