QiDao is a decentralized finance protocol that allows users to collateralize their cryptocurrency assets in order to borrow stablecoin. For example, a user with $100 worth of WETH can create a vault, deposit their WETH as collateral, and borrow miMatic (MAI), a stablecoin pegged to $1 on the QiDao protocol. This allows users to leverage their existing crypto assets to gain access to stablecoin without having to sell their underlying assets.

With data provided by Covalent, in this article we’ll explore the following Quickswap liquidity pools on Polygon for MAI:

• Pair: WMATIC-MAI

• Pairs: USDC-USDT-DAI/MAI

Reach Metrics

Key Insights

• The number of traders or unique addresses interacting with the WMATIC/MAI pool has remained relatively stable over the course of the year, with an average of 180 traders per month. However, there was a slight decrease in the number of traders in October and November. This suggests that overall engagement with the pool has remained consistent, but there was a temporary dip in activity during those months.

• The number of traders for stablecoin pools has seen a general downward trend over the course of the year, from over 400 traders per month to 325 in April. This decrease may have been due to the crypto market setback, as there was a slight increase in traders in May (380 traders) likely due to higher repayments. However, after May the number of traders continued to decline, reaching 375 in November.

• The number of new traders fluctuates between 40 and 60 each month. This indicates that the trading community is consistently growing and attracting new members.

• Stablecoin pools have nearly twice as many transactions as the WMATIC-MAI pool.

• It's important to note that the number of traders mentioned t only reflects a portion of the trading community. Many traders use the Quickswap aggregator, and some traders are actually arbitrage bots. These factors should be taken into account when considering the overall health and activity of the trading market. Additionally, it's worth considering the impact that these factors may have on the accuracy and reliability of the reported number of traders.

Number of Traders

• New users over time

• Trades over time

Pool share for stablecoins

Retention Metrics

Key Insights

• Between April and June most of the liquidity was removed for WMATIC/MAI pool.

• For stablecoin pools, July has the highest mint-to-burn ratio for all pools seen in this article.

Mint to Burn ratio vs Token price

Mint-to-burn ratio is the ratio between tokens added to the pool divided by tokens removed from the pool.

A value higher than 1 means that there were more tokens added to the pool than removed tokens.

Revenue Metrics

Key Insights

• Stablecoin pools have the most volume compared to WMATIC/MAI pool.

• Most Heavy Dex Traders (top 1% in volume) are arbitrage bots, while the most volume is moved through the Quickswap Router.

• Less volume is represented by Heavy Dex Traders on stablecoin pools.

Swap volume over time

Volume represented by Heavy Dex Trader(HDT)

Heavy Dex Traders

How would I allocate $100,000 in rewards?

Considering that

• Most of the swap volume for MAI goes by stablecoin pools by orders of magnitude.

• Stablecoin pools have less volume done by Heavy Dex Traders, which often are arbitrage bots.

• Stablecoins are more liquid because it can be easily changed for FIAT money.

• USDC pool is at least 60% of swap volume for stablecoins, followed by 20% each for USDT and DAI.

I would allocate the rewards in the following way:

• $60,000 in rewards for USDC/MAI pool on Quickswap.

• $20,000 in rewards for USDT/MAI pool on Quickswap.

• $20,000 in rewards for DAI/MAI pool on Quickswap.

Info

Report written for Data Alchemist course on Covalent.

Contact

tw: mrwildcat7

discord: mrwildcat#1969

Cover by rekt.news

Lido is a liquid staking solution for MATIC. It allows users to stake their MATIC tokens on Polygon and immediately get the representation of their share in the form of stMATIC token without maintaining staking infrastructure. Users get staking rewards and still control and utilize their stMATIC tokens in secondary markets on Polygon.

Currently Lido has a Total Value Locked of $14.86b and works on Ethereum, Terra, Solana, Moonriver and Polygon.

Lido already has an integration to provide the ability to deposit stETH into AAVE and allow to use it as collateral.

Security: Lido has been audited by Quantstamp, Sigma Prime, and MixBytes. It has a bounty program running on immunefi.

What is stMatic?

stMATIC is an ERC20 token that represents the account’s share of the total supply of MATIC tokens inside PoLido system.

Quorum Standards

The option with the most votes will be added.

Options

• Add stMatic at 130% min CDR

• Add stMatic at 135% min CDR

• Add stMatic at 140% min CDR

• Further discussions needed

  min CDR = minimum collateral to debt ratio

Tokenomics describes the math and incentives governing crypto assets. A token’s properties can help to determine the quality and value of a token.

Projects with well-designed tokenomics are much more likely to succeed in the long term because they incentive the buy and hold of their token.

QiDao offers zero-interest crypto lending; it allows you to hold on to your crypto while still being able to spend its value. First, it’s necessary to create a QiDao vault, deposit your crypto assets, and start borrowing MAI stablecoin against your collateral’s value.

The protocol works in the following networks: Polygon, Fantom, Avalanche, Moonriver, Arbitrum, and Harmony.

There are two tokens from Qi Dao protocol, the stablecoin MAI backed by collateral, and Qi, the governance token, which is the one I will focus on.

Supply

Supply is one of the essential keys to evaluate a token. Based on supply alone, this token can hold value since it is scarce. It’s not an inflationary token; the supply is fixed and there will not be more coins.

There are metrics that can help understand where the supply is right now and where it will be in the future. Those metrics include market capitalization and fully diluted valuation (FDV)

The market cap is the circulating supply of tokens multiplied by the token price. Current Qi price is $0.63, the Qi circulating supply is 64,338,280 and Qi price is $0.63 then the market cap is around $40,533,116.

The fully diluted valuation is the max supply multiplied by the current price. The total token supply is capped at 200,000,000 Qi so the FDV would be $126,000,000.

The market cap is 32% of the FDV meaning there is still 68% of the supply to be released to the market.

Emissions Schedules

The emissions schedule tells us how and when the rest of the tokens are going to be released. Looking at Qi Dao documentation, it’s possible to see how the Token Distribution is intended to be.

This distribution uses the vesting mechanism which works by releasing X percentage of tokens every certain period of time. This system allows the project to grow to handle the tokens that have been released, by being more established, by being able to show advances or new products . However, the economy has the risk of being affected by the flood of those unlocked tokens when the time comes.

Community Treasury

Will be vested linearly at every Polygon block over a period of 3 years (starting launch) in line with the schedule below:

• Year 1: 50% of the treasury tokens vested

• Year 2: 30% of the treasury tokens vested

• Year 3: 20% of the treasury tokens vested

Strategic Partners

• Vested linearly for 18 months

Keeper incentive

Their role is to provide direction to the network and to maintain and upgrade the codebase following governance votes.

• Vested linearly over 3 years

It is worth noting that at 06:17 +UTC 08/02/22 the crypto streaming protocol Superfluid was hacked. The Superfluid vesting contract that held QI allocations for the core team and early contributors (Keeper incentive) was exploited, as a result all of the Qi in that contract, 19,387,874.05 Qi was stolen and sold on the market.

So it’s worth to explore the actual token distribution.

This graph shows how 63% of the total tokens (200,000,000) are still in the treasury contract and 16% are in the staking contract.

Demand

Having a fixed supply of tokens alone does not make it valuable. So the next question is why would someone hold Qi token?

Qi is the governance token for Qi Dao, changes are made through proposals and voted on by holders of the token. The community needs to address the following matters:

• Collateral types

• Revenue distribution

• Price oracles

• Risk parameters (i.e liquidity ratio, debt value)

• Change repayment fee

• Upgrade to the system

• Qi community treasury decisions

The protocol rewards you with Qi token if you keep your collateral-to debt ratio between ~155% and ~400%.

The protocol incentivizes locking the Qi token for up to 4 years. This allows the holder to earn more voting power and boost their share of the protocols revenue. The longer a user locks their Qi, the larger the boost they receive.

This mechanism is also known as Vote Escrowed Tokens (veTokens), pioneered by Michael Egorov of Curve Finance. veTokens attempt to align the protocol and the token holder’s incentives. Those who are more committed to locking up their tokens are incented to see the protocol succeed.

This model encourages long term oriented decision making, because a holder is making a long-term commitment to the protocol, so this provides the incentive to make decisions that are in the long-term, best interests of the protocol.

The average locking time for Qi is 2.67 years.

Also, this model provides improved supply dynamics. For supply, locking serves as a mechanism to remove tokens from the open market. This can help offset emissions.

Among the risks of this mechanism are the lack of liquidity; if a holder loses faith in the direction of the protocol, there’s no way to exit their investment. This could cause an incentive misalignment, because the holder might be incentivized to make decisions centered around extracting as much value from the protocol as quickly as possible, rather than emphasizing long-term value maximization.

Conclusion

Qi Dao Protocol utilizes some famous tokenomics mechanisms like vesting and vote escrowed tokens for it’s governance token Qi. These mechanisms help to align stakeholders in the long-term success of the protocol.

There are a considerable amount of tokens to be released on the market and it’s uncertain how this will impact in the price.

Still, it’s a relatively new project with a vibrant community and growing revenue.