Ok, guys today I’m gonna be talking about Redacted Cartel.
Redacted is a recently launched OHM fork. Now there have been a lot of Olympus forks over the past six months. And the vast majority of them didn’t really have much to offer, they just jumped on the trend of huge APYs to attract users.
And seeing the success of OHM, crypto degens jumped right in and it became a battle for attention between protocols with nothing unique to offer buyers.
Unlike most OHM forks, Redacted didn’t just copypasta Olympus DAO’s protocol without having a real plan. And in this article I’m going to be covering exactly what Reacted is doing, why it’s special, and how I discovered the BTRFLY cult. I mean token…
If you’d prefer to watch me talk about this instead of reading the article, then I also made a video about my experience with Redacted Cartel’s BTRFLY token.
Let’s do this! 👊
I first heard about Redacted from some of the OG Ohmies on Twitter and Discord a few months back. And in this game, it pays to be first. So whenever I hear about a new protocol I tend to jump straight into the Discord as well as any docs they have. And in this case, I managed to make it into the Discord on pretty much the first day it launched. And seeing that the team was looking for people to help out, I was quick to put my hat in the ring and offered to help out in any way possible. A couple of days later, Sami, the founder of Redacted, saw my message and DM’d me to ask if I would lend a hand with their Gitbook.
Now, let me clear here. There was no payment for this, no tokens, or anything. So if you’re jumping into DAOs expecting to be paid, don’t do that.
But what it did give me, was worth a lot more. I got the opportunity to dig into their docs first-hand and see that this team was serious. There are a lot of rug pulls in this space. So getting involved with the DAO at the start of a project gives you a big opportunity to vet the team first-hand. I’ve come very close to being rugged, fortunately, I’ve not been so far. Touch wood. But I have come close to having rug pulled out from under me. And seeing the effort that Sami and his team were putting into the launch of Redacted, gave me the confidence to allocate more time to research it. The fact that the team was doxxed, the fact that they weren’t in a rush to launch. It became clear that this wasn’t just a smash and grab. They really took their time to develop a working protocol and build a killer brand.
At the end of the day what we’re looking for in great projects, is great teams. And great teams are the ones that are in it for the long-haul and are going to keep building. If anything its a red flag for me when a protocol launches too quickly after first coming onto the scene, because how can they have possibly had any time to build anything of value.
And there are so many opportunities in this space right now, and your attention is limited. So figuring out early on in the life of a project whether or not you should continue to research it and allocate time or capital, is really important.
Anyway, that explains how and why I decided to buy some BTRFLY, but what exactly is REDACTED doing.
What Is Redacted Cartel Doing
You know I consider myself an intelligent person, but even I struggle at times to fully grasp how clever these strategies are. And that’s why I’ve fallen in love with this space of late. Redacted has to be one of the most giga-brained moves I’ve come across so far. It’s a such a simple and beautiful approach to printing money. Just before I cover how it works, please do me a favour and smash that like button! It really helps with the youtube algorithm.
Redacted is using OHM tokenomics to accumulate as many Curve ecosystem tokens as possible in their treasury. In short, their goal is to accumulate as much liquidity as possible from the Curve ecosystem in order to have a majority say over the Curve gauge.
To understand why they would do this, we first need to know a bit more about Curve.
What Is Curve Finance?
Curve is a decentralized exchange designed to provide the best possible rates for users who are trading stable coins. It uses liquidity pools to make trading more efficient. And every time someone makes a trade on Curve, liquidity providers get a small fee. Some liquidity pools are also supplied to lending protocols which means liquidity providers earn extra interest on top of these trading fees.
Now, just like most decentralized finance protocols, Curve has its own native token, CRV. The purpose of CRV is to incentivise liquidity providers on the Curve Finance platform.
CRV can be staked to receive trading fees from the Curve protocol and boost rewards on provided liquidity. But in order to vote on rewards you must first lock your CRV into a staking pool to receive veCRV. Votes and rewards are weighed by both the number of tokens and the duration for which the tokens are time-locked. The longer the lock-up period, the greater the voting power and the larger the rewards. Users can lock CRV for a minimum of a week and up to four years. And the longer the CRV is locked, the bigger the “boost” in rewards (up to 2.5x), which means that the user receives more veCRV (vote-escrow CRV), which aligns long-term stakeholders with the protocol’s success.
So why would a user want to give their CRV to Redacted? Well, the benefit to the user is that they receive Redacted’s native token BTRFLY, which is liquid. This is important because Token holders are required to lock CRV for veCRV which acts as the illiquid access token to the governance mechanism and most users might not want to lock their CRV tokens as they may need the liquidity. REDACTED incentivizes bonding tokens from the Curve ecosystem in to their treasury in exchange for the BTRFLY token. And each BTRFLY token is backed by value from the Curve ecosystem locked in the DAO treasury. So users are receiving a maximized yield and are in possession of a liquid token that is securely backed by stable assets, because BTRFLY is primarily backed by the stablecoin LP tokens, which remain relatively stable regardless of the market dynamics.
Redacted on the other hand doesn’t need liquidity. So they can lock the tokens to maximise the yield. So the benefit to Redacted, is that they accumulate voting power over Curve, which they can then apply to their own benefit by voting in favour of boosting rewards to liquidity pools that align with the interests of the Redacted Cartel. Of course, this has a flywheel effect as Redacted receives more rewards in the form of CRV, which they can then lock to receive veCRV which grants them increasing voting power over the Curve gauge.
Pretty ingenious if you ask me! But what the hell is Curve gauge?
What Is The Curve Gauge?
On Curve Finance, the inflation, that’s the newly minted CRV rewards, is going to users who provide liquidity. This usage is measured with gauges. The liquidity gauge measures how much a user is providing in liquidity.
Now obviously CRV is pretty valuable to anyone wanting to control the Curve gauge. A huge number of DeFi apps use Curve to source liquidity and yield. And oftentimes other protocols will offer bribes in their own native currency to encourage Curve holders to vote for their liquidity pools.
In fact, recognizing the importance of the curve gauge to the success of different protocols, Yearn Finance released a tool called bribe.crv.finance that allows DeFi projects to bribe veCRV holders with token rewards in exchange for their votes.
This means that Redacted, as one of the largest CRV holders can earn bribes in the form of other tokens. Whilst also earning more CRV. So when I say it’s unlike most OHM forks, that’s because it actually makes money. And it makes a heck of a lot of money!
At inception, the treasury took in $73 million dollars. And as of this filming the treasury is already worth a whopping $151 million dollars.
Now a large part of this is the result of increases in the prices of the underlying treasury assets as well as bonding. But the treasury is also making a killing by putting its assets to work. The last reported earnings figure from December suggests the treasury is making $35,000 dollars a day in CRV rewards alone. That’s over $12 million dollars a year and that’s just getting started.
Hopefully that explains what Redacted does and why it’s so cool. If I missed anything important or didn’t explain anything well enough, be sure to let me know in the comments below.
Now, how about how much money I made?
Redacted’s treasury bootstrapping event, a.k.a Operation Swallowtail involved a Dutch Auction, which is about as fair a launch as you can get so kudos to Sami for running things this way.
The auction had a starting price of $5,000 dollars and an ending price of $50, with the price decreasing linearly over a 48 hour period. There was a fixed amount of one hundred thousand BTRFLY available across three bonding pools. One each for OHM, CRV and CVX. If you wanted to participate all you had to do was commit to buying at any given price before the auction ended. You see, in a dutch auction, the final price is only settled upon once all of the tokens have been sold. So individual participants decide at which point they’re happy with a token price and commit their funds — yet the auction continues until everyone is happy with the token price. And ultimately, every buyer gets the cheapest possible token.
The final price was $733 per BTRFLY token as a weighted average across the three bonded tokens. Today’s price is about $600 dollars and I put in just under $11,000 dollars.
Now you may be thinking I lost money on this…
Of course, this is an OHM fork, so over the last month, I’ve been enjoying rebase rewards which has increased the number of BTRFLY tokens I hold almost two-fold.
Today the BTRFLY Index stands at 1.94 which means my initial investment is now worth about $18,000 making me a profit of $7,000 in a little under a month, which is ok considering the current market volatility. And almost makes up for the beating my OHM has taken this past week! Having said that, this is crypto so I could easily be back to $11,000 or less in a matter of days.
Now at one point, I was up almost $100,000 in paper gains and I chose not to sell because I figured I’m in it for the long run. But to be perfectly honest, I’m not so sure that’s the right attitude and I do think I could improve my returns if I could maintain this opposing mind of trader and investor. There’s certainly something to be said of selling something that’s up 10x in a week. Because chances are you’ll get the opportunity to buy it back cheaper. But then again managing these conflicting mindsets of trader and investor can be challenging especially when it’s not your full-time focus. I guess what I’m trying to say to you is that we should always reflect on our actions to learn and improve. And even if you are invested in something long term, it’s OK to take profit when it makes a big move in a short space of time. So when you’re looking at buying any asset you should be asking yourself what timeframe you’re expecting to be in for and what your price target is.
That’s me done with the wishy-washy investing philosophy and that sums up everything you need to know about Redacted Cartel and BTRFLY as well as how much I’ve made so far.
As always, this is not financial advice and blah blah blah.
Thanks for reading :)