Mechanics of Downshifting: Magic of Second Gear

Just to be clear:

Should you buy a Lambo just because the mega-bubble hits and now you're a multi-millionaire? We'll that would be quite irresponsible considering you need to be saving money for the inevitable dip. Status symbols are a toxic piece of society rooted in classism and pretentiousness. Don't waste your money on being a dick IMO.

However, there are certain advantages to doing things the old fashioned way. Take the manual transmission vs an automatic. With the automatic transmission you can go on auto-pilot and not have to worry about being in the correct gear. A manual stick-shift is a lot more "work" especially for those who are just comminuting to work in rush-hour traffic. Sometimes it's just better to zone out during the downtime and turn on that audiobook instead.

However, an automatic transmission doesn't know when you are going up/down a hill. It doesn't know if you are making a turn or if the ground is wet or icy. All your car knows is how fast you are going and how much gas you give it. There are always certain situations where the analog technology is going to be superior to the digital version, just like vinyl records vs an MP3 player. Digital is more convenient, analog is for the hardcore users.

A stick-shift in a car follows the same principal. There are many instances where the car should be in second gear on a turn or hill but automatics aren't smart enough to make that call. The smooth compression of the engine leaves the car hugging the road and ready to accelerate at a moment's notice. You can gas it at high RPMs that automatically start breaking the car perfectly while an automatic would upshift making the maneuver more volatile and dangerous.

Where am I going with this?

I'm starting to view DEFI and yield farming in the same light. Like a manual transmission, we have the opportunity to really dive deep into technology and tweek certain variables that are appropriate to the situation.

Whereas networks like Bitcoin have no options, I view the original granddaddy of crypto more like a fixed-gear bicycle. There are no options and only one gear, but it will be super reliable and never break down. Meanwhile, DPOS products allow us to manually vote on how the network should operate. The "digital" versions of these things don't even exist yet. We are still in the early phases.

Examples

What happens if the value of a CUB token crashes into the mountain? An easy question to ask because it's already happened. How can we correct the price and stop the bleeding? The answer was simple: cut the fat on the external yields and double the reward for HODLING. This has already worked quite well, securing this low level as a major support as the network braces for upward movement.

However, what if these IDOs push the price of CUB too high? You might be thinking there's no way to push the value of crypto too high, but that kind of thinking is self-serving and quite flawed. It should never be the goal to unsustainably pump the token value of any asset. Stability and long term growth are much more important than making the old-school holders rich.

Therefore, if CUB pumps too high (talking $5-$10) there are several options available to increase liquidity and bring the price down to earth. This is in the long term interest of everyone on the entire network (especially including future users who have yet to discover the magic of this platform).

I call it: downshifting.

By lowering the yield of the Den (Cub Kingdom) and increasing the yield of the LPs (especially the CUB/BUSD LP) this greatly incentivizes the generation of liquidity in the pools while at the same time pushing that same liquidity out of the den where it is harming the platform. If there is massive demand to buy CUB, we shouldn't be trying to create a supply shock on purpose, but rather lean in the other direction: creating even more liquidity to soften the dump should it happen (or lower slippage if users are still buying).

Obviously upshifting would be the opposite of this: where the network cannibalizes the LPs by lowering yield there and allocating it to the Den/Kingdom. We do this when the network is oversold and we need to correct the price to the upside.

This kind of control and autonomy over inflation is going to quickly prove that yield farming networks are vastly superior to Bitcoin/Ethereum and all the other deflationary assets out there. Creating supply shocks on purpose and celebrating a complete lack of liquidity is extremely foolhardy, and this is something that every single Bitcoin maximalist does at the core of their ideology. We have a long way to go before we figure this stuff out for real.

This kind of control over DEFI tokens will also allow us to stabilize these networks and allow us to create assets that act as a unit of account. Rather than increasing token price, the ultimate goal with DEFI is to keep token price as stable as possible while increasing yield across the board. More inflation is better, as long as that inflation is sustainable and in equilibrium with supply and demand. This is a concept that 99% of people in crypto don't seem to understand yet, and the dominant concept still revolves around provenly inferior deflationary economics.

This is when the central banks are going to realize that they are in seriously deep shit. As of right now they know for a fact that Bitcoin can't scale or act as a unit of account. Centralized product has a hard enough time scaling as it is, and the added deflationary pressures incentivize hoarding and very low money velocity, the exact opposite thing you'd want when forging an emergent digital economy.

Meanwhile, the killer dapp in DEFI is liquidity itself. This is obvious when we consider where inflation is being allocated. On Bitcoin, inflation is allocated 100% to security, while in DEFI 100% of inflation is allocated directly to AMM and getting as much liquidity is humanly possible. These liquidity traps are going to make the 2017 ICO mega-bubble look like a cakewalk. The end of the year is going to be absolutely out of control.

Resistance is futile

Speaking of market speculation and deflationary economics, Bitcoin has once again confirmed that we are in extreme supply-shock mode. The resistance line that I've been claiming would be crippling? We passed through it without so much as flinching. I can't really emphasize how bullish that is: the mega-bubble is here, and we are still in the foothills. $250k here we come.

To break through this line and then confirm it as support (at low volume) really is something else, and it's all happening during the bearish part of the moon phase. I practically expect August 22 to September 6th to go parabolic at this point.

Supply-shock confirmed at:

• $29k
• $38k
• $44k

Each time we've moved up quickly and on low volume, meaning there aren't a lot of buyers, but the sellers have completely vanished even at the price skyrockets. This is a great sign for the value of our bags, but a terrible sign for those who value stability and strong liquidity within the market. Again, supply shocks and deflation are bad: every economist knows that. That's not the kind of atmosphere you want in order to get new users and actually keep them around. It's only good for the original gangsters. Cheers to that.

Defi fixes this.

With DEFI, we have much more control over inflation and finally have the technology to exponentially increase liquidity while also creating units of account with logarithmic volatility. In many respects it's the best of both worlds and utilizes a new technology (AMM) that is almost guaranteed to take over due to its superior ability to honeypot liquidity.

Conclusion

Remember when this all started taking off like a year ago? The Uniswap airdrop was September 16th 2020. How many speculators have been talking about DEFI peaking and being overvalued since then? This thing hasn't even come close to peaking. ICOs are a joke compared to DEFI and yield ownership. The honeypot is real and the liquidity is near infinite when yield meets exponential curves.

While I'm pretty much all in on CUB as far as DEFI is concerned, there are tons of good projects out there, and even CUB will be launching new networks with IDO technology that simultaneously increases demand to parabolic levels.

Everything is looking pretty good in terms of the tech and where this is all going. All we have to do is remember to balance our positions as prices go up rather than get caught up in the FOMO that results from Bitcoin's current supply shock. My plan has always been to hold until Q4 2021. No sense in changing course now.

Posted Using LeoFinance ^Beta