69,000% APY! What is Going on with Wonderland (TIME)?
You thought 20% guaranteed returns by Bernie Madoff was a stretch? How about 69,000% a year?
Welcome to wonderland finance and it’s native token TIME.
Now when I first heard of this project talked about on social media, I brushed it off as clearly a scam. But lately, I have seen more and more influencers promote it as easy money and a legitimate way to make a ton of money.
That is the moment, I was like “I have to check out how this actually works…”
I’ll be honest, I went into this research session with a bias that it is a Ponzi scheme, but before declaring an official opinion on this project I had to see how it actually works.
I know people sometimes claim something as a Ponzi when they just don’t understand something. I mean people have called bitcoin a Ponzi for years…
Let’s begin with the actual definition of a Ponzi scheme.
An investment fraud that pays existing investors with funds collected from new investors. Ponzi scheme organizers often promise to invest your money and generate high returns with little or no risk. With little or no legitimate earnings, Ponzi schemes require a constant flow of new money to survive.
Under that definition, it is clear something like bitcoin is not a Ponzi as it does not promise huge guaranteed returns. Just because an asset goes up in value due to people buying it for higher prices doesn’t make it a Ponzi scheme.
Back to TIME, I promise to go through the facts and stay objective to come to a final conclusion at the end of this.
TIME launched in September 2021 as a fork of Olympus. It was founded by Daniele Sestagalli, an entrepreneur with experience in the crypto world but most of the dev team is anonymous.
The fact that someone’s actual name and face is attached to the project actually makes me believe that it may not be a Ponzi. Why would anyone in their right mind create a programmed Ponzi scheme then attach their face and reputation to it?
What exactly is it? Per there documentation
Wonderland is the first decentralized reserve currency protocol available on the Avalanche Network based on the TIME token. Each TIME token is backed by a basket of assets (e.g., MIM, TIME-AVAX LP Tokens, etc.) in the Wonderland treasury, giving it an intrinsic value that it cannot fall below. Wonderland also introduces economic and game-theoretic dynamics into the market through staking and minting.
So the point of the project is to take in reserve assets with value and give them a crypto token called TIME in return?
My first question is why do you need TIME to begin with? Is TIME only created when assets are put in this treasury reserve? Why is TIME needed?!?
Their defined purpose is as follows:
Our goal is to build a policy-controlled currency system, native on the AVAX network, in which the behavior of the TIME token! In the long term, we believe this system can be used to optimize for stability and consistency so that TIME can function as a global unit-of-account and medium-of-exchange currency. In the short term, we intend to optimize the system for growth and wealth creation.
We intend to achieve price flatness for a representative basket of goods without the use of fiat currency, in order to allow the cryptocurrency industry to detach once and for all from the traditional finance world!
They also mention in the FAQ section that it supposed to be a non-pegged stablecoin (bit of an oxymoron).
It seems they want to be the currency of exchange based on backed reserve assets. Seems like a valid statement and reminds me of the whole idea of when the dollar was backed by the gold standard. So for all the TIME out there the value is attached to the underlying assets.
But then they explicitly talk about focusing on creating wealth creation for people. This is the part that is suspect, how is the wealth being created for people that buy TIME? It should be a zero sum game of TIME value = Asset value if it’s purpose is a reserve currency, right? If reserves go up the supply of TIME goes up?
And if that is the case, why do I need TIME to spend if the backed assets are cryptocurrencies like AVAX which can already be sent already. Although I do understand if it is a basket of cryptos so then it isn’t attached to only the price of AVAX which would also be valid.
How do you participate with Wonderland?
There are two main strategies for market participants: staking and minting. Stakers stake their TIME tokens in return for more TIME tokens, while minters provide LP tokens or MIM tokens in exchange for discounted TIME tokens after a fixed vesting period.
This is where it sounds like no matter how you participate, you are making money? But again where is the money coming from?
This next part of the documentation is where I start to kind of feel like it doesn’t make sense as it talks how people make money from the protocol.
The main benefit for stakers comes from supply growth. The protocol mints new TIME tokens from the treasury, the majority of which are distributed to the stakers. Thus, the gain for stakers will come from their auto-compounding balances, though price exposure remains an important consideration. That is, if the increase in token balance outpaces the potential drop in price (due to inflation), stakers would make a profit.
The main benefit for minters comes from price consistency. Minters commit a capital upfront and are promised a fixed return at a set point in time; that return is given in TIME tokens and thus the minter’s profit would depend on TIME price when the minted TIME matures. Taking this into consideration, minters benefit from a rising or static price for the TIME token!
It is clear that if TIME is staked and you get more TIME. If the price stays the same in USD, then it is a net gain. But it says this is based on TIME tokens being minted. So who decides when TIME is minted? Who is this treasury? I thought TIME is only made if it is backed by assets?
The second sketchy piece is that minters are depositing funds in a promise of higher funds returned at a later time? Doesn’t that kind of sound like the definition of a Ponzi? Where is all this TIME coming from???
I think the important questions are who controls the minting of TIME and at what time period interval of these supply increases?
How it Works
At this point it is clear to me that there are some contradictory messaging in the documentation, but let’s go through staking, minting, as well as how the new TIME is produced and what it is backed by.
This is the main selling point of the project and what I see influencers talking about the most around that large yearly APY%.
When you stake, you lock TIME and receive an equal amount of MEMOries. Your MEMOries balance rebases up automatically at the end of every epoch. MEMOries is transferable and therefore composable with other DeFi protocols.
When you unstake, you burn MEMOries and receive an equal amount of TIME tokens. Unstaking means the user will forfeit the upcoming rebase reward. Note that the forfeited reward is only applicable to the unstaked amount; the remaining staked TIME (if any) will continue to receive rebase rewards.
I think it’s pretty straight forward. Just how is the targeted APY and rebasing determined?
Rebasing is when your TIME balance increases automatically and it happens every 8 hours. And the rebase rate is the amount your balance increases on the next rebase.
APY = (1 + reward yield)^1095
Reward Yield Calculation:
Time distributed/Time total staked
Time Distributed Calculation
Time total supply x reward rate
Based on current status of the protocol for this video the amount of TIME being distributed on a daily basis is 1.8% of total staked.
It really all comes down to this reward rate part of the formula which drives this extremely high APY. Guess who controls that? The protocol. Which I can’t find any resources saying how that is determined. All it says in the documentation…
Note that the reward rate is subject to change by the protocol.
So based on the formulas above you can see where the insane APY% is coming from.
The above calculator shows you how much you can make, and clearly it promotes getting rich with that subtle line of potential number of lambos lol. I mean the calculator defaults to assume the price of TIME stays constant, so if you compound for an entire year you get some ridiculous return like $1,000 turning into $855,000.
Minting seems to be a way for people to get returns by locking into a contract to get paid over a vesting period (similar to a bond).
Minting is the secondary value accrual strategy of Wonderland. When users mint TIME tokens, they are actually selling their assets in order to buy a bond from the protocol. Minting Actions are a cross between a fixed income product, a futures contract, and an option. The protocol quotes the minter with terms for a trade at a future date. These terms include a predefined amount of TIME the minter will mint and the time when vesting is complete. The bond becomes redeemable as it vests. I.e. in a 5-day term, after 2 days into the term 40% of the rewards can be claimed.
This part is the one that is actually insane to me and where what is really going on is revealed.
Also when TIME is minted there is a distribution of that TIME to three parties.
Minter – The Minter will receive the quoted amount of TIME minted linearly over the vesting term.
DAO – The DAO receives the same amount of TIME as the minter. This represents the DAO profit.
Stakers – After accounting for the TIME distributed to the minter and the DAO, the rest will be distributed among all stakers in the protocol.
So I see that throughout the documentation they talk about that TIME is backed by MIM which is a stablecoin pegged to 1 USD.
Each TIME is backed by 1 MIM, not pegged to it. Because the treasury backs every TIME with at least 1 MIM, the protocol would buy back and burn TIME when it trades below 1 MIM. This has the effect of pushing TIME price back up to 1 MIM. TIME could always trade above 1 MIM because there is no upper limit imposed by the protocol. Think pegged == 1, while backed >= 1.
You might say that the TIME floor price or intrinsic value is 1 MIM. We believe that the actual price will always be 1 MIM + premium, but in the end that is up to the market to decide.
This means that there is a floor price which is the intrinsic value of all the MIM in the treasury. I think it makes sense that there is some premium as well as there is demand for TIME which would make it trade higher than the intrinsic value (and this is the BIG BIG piece).
Hopefully I’m thinking of this correctly but based on market cap locked of $2.9 billion and a price of $8,680 I come up with close to 334K TIME in supply, so that means the floor would be $334K based on at least 1 MIM for each TIME.
$2.9 billion market cap vs. $334K in intrinsic value.
The team actually talks about why the price of TIME isn’t relevant in long term with the below example.
Your TIME balance will grow exponentially over time thanks to the power of compounding. Let’s say you buy a TIME for $400 now and the market decides that in 1 year time, the intrinsic value of TIME will be $2. Assuming a daily compound interest rate of 2%, your balance would grow to about 1377 TIME by the end of the year, which is worth around $2754. That is a cool $2354 profit! By now, you should understand that you are paying a premium for TIME now in exchange for a long-term benefit. Thus, you should have a long time horizon to allow your TIME balance to grow exponentially and make this a worthwhile investment.
The project team talks about the high price of TIME is to capture market share and also calls out that essentially the price could collapse at any time (no pun intended).
TIME could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of TIME could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.
In the staking section, the team talks about how you SHOULD make money even though TIME is essentially programmed to fall in price converging on ZERO. That is right, they actually say the word ZERO. But what they don’t say in any examples is that the price of TIME actually falls to $0, therefore they still paint the picture that although the price is designed to fall, if you hold on staking, you SHOULD still make money.
Staking is a passive, long-term strategy. The increase in your stake of TIME translates into a constantly falling cost basis converging on zero. This means even if the market price of TIME drops below your initial purchase price, given a long enough staking period, the increase in your staked TIME balance should eventually outpace the fall in price.
The project is also not audited according to their documentation.
Wonderland is currently unaudited! It is a fork of Olympus DAO on the avalanche Network, audits will occur at a later stage. Stay cautious!
I mean the project itself is saying “stay cautious”, like isn’t that kind of a slap in the face?
Price Expansion Explanation
If the project is designed where the value of TIME should be going down, why is it actually going up?
A big piece to TIME not going down in price is that if people keep buying TIME and staking (locking up liquidity and making it so there isn’t selling pressure) due to the hype around these types of projects.
This is literally a chart in the documentation talking about if you decide to sell TIME you are hurting everyone’s ability to make money lol.
The Era of Influencers and Social Media
Love it or hate it, the time of bragging about insane gains is upon us which can lead to reckless speculative behavior. When people see they can make easy money in something though, the logical side of their brain turns off and they listen.
The thing is you can make money from this project based on how it is setup. So do I knock people making money? Not at all. It just seems like eventually the price will collapse at any sign of weakness which will wipe out those that are risking money they can’t afford to lose.
I actually can’t call this project a Ponzi. Throughout the documentation, they constantly use words like “eventually”, “should”, “could”, “theoretically”. Although I can’t call it a Ponzi, it is clearly being designed to be deceptive with extremely high APY and exponentially growing supply of TIME. To those that don’t take the time to actually go through the project, the documentation, and how it all works they may be in for a surprise.
Basically it is designed where you make a decent amount of money at the beginning so as long as the price of TIME doesn’t collapse (which it is designed to do eventually). So if you stake and the price doesn’t collapse, count your blessings because the project is going against the logical thing. The biggest reason behind this is probably the fact that people don’t necessarily know what is happening and therefore the price of TIME is being propped up by those aping in to get high returns. Therefore, those that get in early get the benefit of this price support and hype around the project. But eventually I think it will be a game of chicken.
Once the price starts to drop it can be full on panic before people realize that the intrinsic value in the treasury is much smaller than the value of all the TIME out there. When that happens? No idea. But the protocol is designed to do exactly that as currently there seems to be a huge disconnect between the intrinsic value TIME (huge premiums paid to acquire TIME right now).
The people that will be hurt the most are those that get in when there is a massive premium, get greedy and put in too much money because they see others making bank.
So I wouldn’t touch it, but as always people have to decide on their own if they would want to get involved with this project.
Who knows how long the good times last? A week, a month, a year, 5 years? But it is clear from the documentation that the team itself expects a huge price correction at some point.