🥮Strategy
Treasury strategy, Supply strategy and Team strategy explained here.
All our returns are measured in $SOL which is also the base currency of our treasury. The daily raffle prizes are in $SOL too.
Treasury
Our goal is to grow this treasury in order to create random & sustainable returns in $SOL for users since we believe $SOL goes up long-term.
Our Treasury will work in 4 different ways:
NFT-Fi $SOL Lending (60%)
DeFi $SOL & $USDC Lending (20%)
Market Making (10%)
Degen Plays (10%)
These are indicative numbers, the weekly reports will confirm these numbers in real time on our discord.
NFT-Fi
NFT-Fi space is growing at a fast pace, with strong usage from the communities that generate high return yields on every SOL loan on protocols such as FRAKT, Citrus, etc...
The majority of the treasury is currently working on Citrus, offering loans on the best collections in Solana (a sustainable floor is our priority), with returns over 100% APR, for a small risk of default.
These lending pools are allowing high return yields (10% to 30% APR) without any impermanent loss. That is why we will deposit a % of our $SOL treasury on FRAKT farming this yields, a keep a better liquidity on it, fludifying our treasury movements.
DeFi
DeFi in Solana may have been in trouble the past months but we believe in a fast and healthy recovery during the next months. (edit: Sol did a nice recovery, isn't it ?)
DeFi and Lending protocols such as SoLend, Meteora, Kamino, and Orca, have subsisted through the hard times and supported the stress tests. Their products are low-risk positions and the yields remain interesting, especially during DeFi bullruns where APR% are mooning.
This is why we will regularly compare these protocol opportunities to $SOL PoS protocols securing the chain.
There will probably be no funds allocated to this part of the strategy as long as it is not competitive next to the other opportunities (explained above and under). But once the favorable scenario appears, a part of our $SOL and our $USDC will go to work there, avoiding risky bets.
Market Making
As this project tends to have liquid NFTs and is not counting on royalties to generate over-collateral for the treasury, we will allocate a part of our funds raised to launch a Market-Making side of operations and we will mainly use Tensor from mint to secondary for this to be done correctly.
Once enough $SOL has been captured this way, we'll start pooling some of our NFTs on Tensor/HadeSwap backed by the intrinsic value in SOL, to generate fees from market making.
Degen Plays
We have several ideas for our Degen plays but we will execute them only when the risk/reward ratios are at their best:
Hold some high retaining value type of NFTs that can ensure daily/weekly/monthly rewards which would be fully compounded to grow the daily harvests, and traded later looking for profit.
Our P2P Loaning strategy on https://citrus.famousfoxes.com/lend can be considered as such, because of a risk of defaulting into an instant sell floor price lower than the loan.
Send a tiny part of the treasury to Algotrading Strategies built by the team exclusively for MagiCake.
Compound Effect
Through the managed yielding treasury, the daily harvest will be separated into 4 parts:
42.5% will be distributed to the winners.
42.5% will be compounded directly.
10% will go for the team.
5% to the Safety Net
The compound effect may reduce the number of $SOL distributed each day via raffle in the short-term, but allow the Treasury to grow over the years and get to a bigger scale and so the daily rewards later.
The reduction of distribution due to the compounding effect on the Daily Raffle is less of a pain as the price of $SOL is low & more practical as $SOL will be harder to capture at higher prices.
It is possible later down the road to vote with the community on a new Compound/ Distribution ratio when the financial parameters of the project have changed.
Over-Efficiency
As this simple project has a base treasury initially capped at 1100 $SOL (growing from zero proportionally to the number of NFT sold), every profit made from the treasury working will be easily accountable as over-efficiency.
Following is a list of different ways to capture it:
42.5% of yield is considered as Compound.
5% of the yield goes to the Safety Net
Safety Net (magicmill.sol) is a separate wallet in order to receive a few SOL, mSOL, bSOL, that plan to get accumulated in the long run and to reduce even further the risk of unsolvability.
Supply
Our supply strategy is simple. 333 NFT pre-minted and sold on Magic Eden & Tensor at 3.33 $SOL.
By limiting the supply to 333 we allow our users to have a minimum of 0.1% chance per cake owned to be drawn each raffle. (Can get higher if the number of circulating cakes is lower than 333 and if there is more than 1 winner per raffle)
AMM on HadeSwap x Tensor will be set up once a significant part of the collection has been sold to allow users to enter and exit easily.
A burning mechanism can be implemented later down the road after the buy-back mechanism has retained enough value. This is in order to reduce the supply over the long term to make this circle smaller and so grow the chances per ticket.
Strategy Advantages
Antifragile
Auto reinforcing
Generating profits in any market environment
Profits from Day 1
Profits come from sustainable businesses
More profitable than other similar projects
Relies only on a few actors in the market
No liquidation risk
Compounds on the long run
Funds invested tend to be over-collateralized
Supply tends to become more liquid even though it reduces over time
Even taking into consideration the lack of liquidity an NFT could bring, the benefit from gathering funds as a project and applying a simple strategy on top of it, makes our product more interesting than a lot of self-management strategies. More of this, without any direct interactions on-chain and daily optimized aiming management required for the users.
Team
The team will manage the treasury wallet and ensure the best financial returns possible on the funds managed via DeFi and NFT-Fi exposure.
The team will own at no point in time a single dollar the treasury owns.
We as team members, are mainly community members at the same playing field level as users.
The team will erode around in one place only:
Performance Fees, 10% of the daily yield generated.
This profit will be used to enhance or automatize the protocol, making it a better tool over time. Allowing the value proposition to be refined in order to scale to a Gen2 and B2B white labelings.
That is why the team has an interest in this concept to run in the longer run & to scale in TVL over time, via compounding and new rounds.
Scaling
This proposition to the market is the Gen1 of MagiCake.
Our main goal in the beginning is to scale the safety and automation of this project. Once this is done, we will be able to expand our offer by creating new generations also composed of 333 NFT that will aim to raise more $SOL than the precedent Gen.
These new generations could pour a little part (1%) of their daily yield into the precedent ones.
B2B implementation is also possible later down the road to help private communities manage the part of their treasury they would like to allocate to the concept for their own circle and reward distributions.
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