or not..
Note: Hello cappies, it has been a rough couple of weeks for me. I am sure we all heard the Iron Finance debacle. Let’s review and draw up lessons from this incident…
What is Iron Finance?
Iron Finance uses a two-token mechanism, an IRON stable coin intended to be pegged to $1, and a TITAN collateral token. This is designed to absorb market volatility caused by shifts in the supply and demand for IRON.
IRON — partially collateralised token, soft pegged to the U.S. Dollar
TITAN — collateral token of the farm. aka native token.
Thought process — I was sold by Iron Finance
Capital efficiency, the holy grail. The chase to constantly increase capital efficiency so we can make MORE YIELDS = MORE MONEY. Fractionalized or partial-collateralized stable coins was a very compelling concept as described by their documentations. Time load up the guns and GET IN.
What I bought. How did I “de-risk” myself?
Note: Putting this quote here again to remind myself and others
ALL NATIVE TOKENS (OF FARMS) WILL EVENTUALLY DROP OFF TO ZERO. SO THERE IS LITTLE OR NO UTILITY IN HOLDING THEM
- IRON-USDC Pair
IRON is a stable coin. USDC is a stable coin. Both are stable coins and rewards are in TITAN. I can auto compound the rewards to earn more IRON-USDC, that way I will not be subjected to the volatility of the farm’s native token TITAN.
How do auto-compounding works?
I auto-compound-ed my IRON-USDC pair on 11 Finance. Essentially what the protocols do is that on each periodic basis, it will take TITAN rewards and sell it on the market to get 50% IRON and 50% USDC to form the pair, adding more IRON and USDC to my LP position each day.
“My volatile native token TITAN is being converted into stable coins USDC and IRON daily. Life is great, or so I thought..”
2. TITAN-MATIC Pair
I got in when TITAN was only $8. TITAN kept increasing in price and I did not want to miss out on the 1,600% APY!
-> Why not auto-compound the TITAN-MATIC pair since the TITAN rewards will be sold in exchange for MATIC/TITAN daily? That way I can accumulate more MATIC daily! Fantastic since I am a huge MATIC believer!
-> I understand the dangers of auto-compounding. What if the vaults were rugged or hacked? Thus, I chose the “safe” route and auto-compounded my various positions on 3 different farms namely Beefy Finance, PolyCat, and 11 Finance, thus spreading my risk ! #smug
3. TITAN-ETH Pair
Quickswap and sushiswap were offering various TITAN and IRON pairs. Trading fees and liquidity fees were sky-high. I noticed the TITAN-ETH pair had low liquidity and high fees/APY. Why not be a TITAN-ETH liquidity provider and earn QUICK tokens in the process!
THEN IT CAME CRASHING DOWN LIKE A DECK OF CARDS.
It doesnt matter what happened. Different pathways but in the end ALL NATIVE TOKENS (OF FARMS) WILL EVENTUALLY DROP OFF TO ZERO. Only results matter, no point finding out what happened as different people will have different perspectives on the happenings anyhow.
- Autocompound IRON-USDC Pair — TITAN rewards
- Autocompound TITAN-MATIC Pair — TITAN rewards
- Autocompound TITAN-ETH Pair — TITAN rewards
- All is good when TITAN price is stable or appreciating, as TITAN rewards will be sold to get me more ETH/MATIC/USDC depending on the pairing.
- BUT WHEN TITAN DROPS TO ZERO WHICH I KNOW IT WILL, ALL HELL BROKE LOOSE. To maintain the 50–50 ratio in each pairing, my ETH/MATIC was constantly sold to buy more the TITAN token whose value is fast approaching ZERO.
END RESULT — AFTERMATH OF INCIEDNT
Only IRON-USDC survived as the pairing was not paired up with TITAN. I was able to get back my money in the IRON-USDC pair, albeit a 10–15% loss in IRON. TITAN-MATIC became ZERO value assets. TITAN-ETH became ZERO value assets.
LIFE GOES ON. LESSONS LEARNED.
- NEVER GO INTO ANY LP PAIR WITH ANY NATIVE FARM TOKEN.
- ALL NATIVE TOKENS OF FARMS WILL DROP OFF TO ZERO.
- FOR BEST RESULTS, SINGLE-STAKE THEM INTO FARMS. SELL WHATEVER REWARDS INTO STABLE COINS (USDC/USDT) DAILY.
- LIFE GOES ON
Life indeed goes on cappies. After the fiasco, the telegram group chats were full of victims having lost their life savings, wanting to commit suicide. Life goes on cappies, always stay alive. Do not over-invest, be aware of your financial situation.
Another day another chance. Never ever forget that. #stayingalive
