Today I looked into the numbers of the Animal Farm. Some interesting stuff can be identified as a result of actions by investors and mainly sellers in this case.
In this article we will go over these elements, show them and try to explain why those are indeed interesting.
What happened?
Lets start with a little summary of the Animal Farm game mechanics which are at play these days:
- DOGS price went down because of sells
- PIGS price went down because of sells
- BNB Vault growing because of DOGS sells
- BUSD Vault growing because of DOGS sells
- DOGS emission rate went down because of DOGS price decrease
- APRs of farms and pools down because of DOGS restricted emission rate.
- DOGS getting burned fast because of restricted emission rate
I might have missed some elements, but these are the ones we will zoom into.
DOGS token price
In the DOGS ($AFD) chart we can see a strong sell off happened over the last few days.
This is interesting because the high taxes applicable for this particular token incentivises people to hold instead of selling. As you may know DOGS tokens start off with a 90% tax on sells and transfers. By staking DOGS in the Dog Pound the total tax can be reduced all the way down to 6% eventually.
But since the tax reduction goes by a max rate of 1% per day and the token was launched on the 1st of November no-one can be near this 6% already. Staking since day one would give someone a maximum tax reduction of 51% on the token plus an additional 2% from the wallet loyalty score, hence, 53% reduction in total leaving 37% tax on each sell or transfer (on December 22nd).
Every DOGS token which is sold today is charged with 37% or more tax.
So what would be a reason for someone to sell? There can be plenty reasons of course but either way one will take quite a big hit.
Taxes flow into BNB and BUSD Vaults
Although for the DOGS token holder the value of his total stake is decreasing. The incentive for holding the token is increasing. Following the purpose of the platform, which is focussed on never selling a native token while earning dividends, this has always been the goal.
The taxes are collected, 3% of the total is burned, the remainder is distributed to the dividend payout vaults:
- 1/3rd of the taxes charged on the DOGS tokens flows into the BUSD Vault paid out to the Pig Pen stakers.
- 2/3rd of the taxes charged on the DOGS tokens flows into the BNB Vault paid out to the Dog Pound stakers.
These days we have seen both vaults increasing in value because the net result of these sells versus the daily payouts were in favor of the inflow into the pools. More inflow than outflow.
In the images below you can see the total value of the BUSD Vault on December 13th (taken as a snapshot for one of my previous articles) and the value of this Vault as of today (December 22nd)
In the next image you can see the BNB amount in the BNB Vault increasing since the sell off started as you could see in the above chart:
I discussed the way this works for the BNB Vault more in depth in my last two articles. You might check it out is you are interested.
https://cryptozoa.com/dog-pound-bnb-vault-in-and-outflow-and-how-to-play-the-game-e26a23db1ece
https://cryptozoa.com/the-dog-pound-mechanics-are-coming-into-play-e6761eddf4e
The effect of D.D.S.C.A.; wha-what?
In addition to the mechanics regarding the vaults there are more interesting things happening. D.D.S.C.A did its job.
This abbreviation stands for: Dynamic Decentralized Supply Control Algorithm.
And the following is what it does:
Maximal is 100% emission, Pegged 75% Restricted 50%, and deflationary 25%
“When the demand for the token is strong and the token price is at All-time-high (ATH), the emission rate will be set to 100% and will stay at this rate until the price does at least a 25% correction from all time high to all time low. If this happens the D.D.S.C.A. will restrict the supply, allowing the current buy pressure to have a greater positive price impact and price appreciation. It will reduce the emission rate by 25%”
“The emission rate adjusts up and down by 25% based on where price and demand are in relation to all time high and all time low. The emission rate can never drop below 25% and can never increase past 100%, although the algorithm used to determine the emission rate is dynamic and always learning”
If you apply this to the price action we’ve seen in both the DOGS and the PIGS token, you can understand that the Emmission Rate was adjusted from formerly Pegged status to Restricted now. Because of the strong price drop.
That’s sad for the farmers and stakers since they earn less DOGS and PIGS while staking, or…
The effect of this lowered emission rate is that less new DOGS tokens will become available as a result of farming and staking. This would mean less tokens to sell. While at the same time the BNB Vault payouts have increased and the DOGS token itself is cheap. This could lead to a higher interest for the DOGS token which would lead to buy pressure pushing up the price. Once the price is pushed higher enough (+25%) the algorithm will adjust the emission rate again.
Where exactly this tipping point is for the market to stop selling and start buying or at least swap the sell vs. buy ratio is unknown at this moment of course. In case the price drops even further the algorithm could switch to Deflationary, which means that more DOGS will be burned than will be yielded to the farmers and stakers. Decreasing circulating supply even more.
Thats the anticipated effect of D.D.S.C.A.
APRs on Farms and Pools went down
As a result of the adjustment of the emission rates for DOGS and PIGS the APRs of the Farms and Pools have gone down dramatically as well. If less DOGS and PIGS are yielded per block, lower earnings are generated for the farms and pools. Therefore the APRs went down with the emission adjustment.
As you can figure, if the emission rate goes back up the APRs will automatically adjust along with it as well.
Whereas there were many three digit APRs on the Farms and even on the single asset Pools before, all APRs are below 100% ranging between ~35% and ~90% at the moment.
Number of burned DOGS Exploded!
Last but not least as a result of the tokenomics on the DOGS token, the taxes in particular, the number of DOGS tokens which are burned has exploded the last few days!
You have to believe me on this since I don’t have screenshot of the number of Burned DOGS from last week or so. But when I was working on the Snapshot article I referred to earlier in this article, the number of Burned DOGS was at ~45! Now the total number and its value is:
- 170K DOGS Tokens
- Worth 5.7 Million Dollars
As explained earlier, and displayed in the below image, for each DOGS token sell, 3% tax is charged and is send directly to the burn address. With the high volume of sells we have seen the last few days the amount of burned DOGS drastically increased.
Burning tokens takes out tokens from the circulating supply, decreasing the total number of tokens around which eventually could lead to supply shock, net buy pressure and therefore price increase.
Wrapping up
I guess you can agree with me that these developments indeed are very interesting to monitor. All theoretical explainations of how the mechanics works are now coming into play and are identifiable for the investors. Now we have seen a lot of elements already being triggered because of the price actions and because of the sell pressure.
Next thing we can look out for is how the market responds to this new status quo. Will this new situation indeed lead to decreased sell pressure? Increased interest in the DOGS token because of the higher dividends payout?
I’m very excited to be involved in this ecosystem!
My referral
If you decide to invest in The Animal Farm yourself, after having done your own research, please consider using my referral link. It’s very much appreciated, thanks!
References
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