Platypus Finance Summary Thesis
1. Platypus Finance is a better AMM than Curve
2. Farming PTP provides limited downside and attractive upside
Protocol Overview / Tokenomics
Platypus Finance is a stableswap single-side AMM with an asset-liability management design for maximum capital efficiency and a 'vote escrow' tokenomics model intended to attract liquidity through superior stablecoin APRs. You can access these boosted APRs by staking the protocol's token, PTP, to accumulate the non-transferable vePTP and receive PTP rewards. However, the boosted APR is determined relative to other holders of vePTP, so as the supply of PTP and vePTP increases, sustaining APRs requires more vePTP.
Platypus incentivizes PTP stakers to keep their PTP staked because (1) stakers lose all vePTP when they un-stake, and (2) the boosted APRs from vePTP are paid out in PTP, which allows stakers to compound their vePTP per hour as they accumulate the PTP token.
1. Platypus is a Better AMM than Curve
Platypus is not a simple fork of existing AMM architecture. Instead, it utilizes an asset-liability management design, which treats deposits as liabilities and inventory of stables as assets. This ALM design guarantees lower slippage swaps for traders and no impermanent loss for LPs. Additionally, while the least popular token in a pool limits other protocols, Platypus allows tokens' natural supply and demand to fuel organic growth in each stablecoin pool and, therefore, the overall protocol. To ensure liquidity for all tokens and allow new tokens to be added, Platypus utilizes coverage ratios (inventory to deposits) as the input parameter determining price impact on trades, rather than enforcing an equal value of tokens in either the protocol's deposits or inventory. Driving price impact through coverage ratios incentivizes trading such that the pools are balanced and coverage ratios remain healthy. Given Platypus improves on the Curve model, it has already surpassed Curve's TVL on Avalanche and now has $1.2Bn in TVL. Becoming larger than Curve should further incentivize the use of the platform and additional market share gain for Platypus. Expansion to other chains is also possible but not expected.
2. Farming PTP Provides Limited Downside and Attractive Upside
Risk-managed positions in Platypus are ~80–90% in stablecoins, and PTP downside is limited from tokenomics that incentivize staking of the PTP token. The upside is Platypus' potential to grow into the largest stableswap on Avalanche. Platypus' main problem is the highly inflationary nature of the protocol, with a monthly emissions rate of 3MM and a max supply of 300MM (exact emissions schedule is unpublished). While the inflationary nature of the token certainly will create selling pressure, there are signs of brewing Platypus wars between Echidna Finance and Vector Finance, which will ensure most PTP remains staked as protocols rush to accumulate as much PTP as possible. These Platypus wars are bullish for PTP and provide options to potential LPs, which incentivizes liquidity to flood to the protocol, along with fees. Multiple protocols like Curve's Convex Finance are launching on top of Platypus, including Echidna Finance and Vector Finance. The vePTP model creates a flywheel effect for the protocols that control the most PTP because it allows them to accumulate vePTP and, in turn, farm PTP faster than all others using the protocol, which ensures their stake in the overall protocol grows as everyone else gets diluted.
Recommended Strategy
· Equal-split stablecoin deposits with a ~10–20% PTP position to boost APRs above the median boosted APR (to ensure more vePTP than others), then sell ~80–90% of PTP rewards into stables to compound back into Platypus
· Alternatively, use Echidna Finance at release for their boosted stablecoin APRs (incremental smart contract risk)
Near-Term Catalysts
· Platypus' Twitter account appeared to be teasing Rush 2.0 rewards, especially given that Platypus was initially given a grant by the Ava Labs team back in October 2021, making them likely to receive incentives again as dedicated buildooors on the Avalanche ecosystem
· Further Platypus wars between Echidna Finance and Vector Finance for boosted APRs without direct PTP exposure means more liquidity deposited into Platypus and even lower slippage trades
· Additional Platypus features on the roadmap, as the team has hinted at expansion into other DeFi verticals (e.g., lending, NFTs, etc.)
Notable Risks
· PTP token unlocks for VCs (late March), creating additional sell pressure
· Large Alameda involvement may lead to a farm and dump scenario
· Heavily inflationary token with limited reason to exist long-term once incentives dry up
· Unable to maintain MIM liquidity after SifuGate, which puts into question the viability of Platypus' ALM design through black swan scenarios (e.g., USDT collapse), especially as they had to use Curve to get rid of their MIM
Nothing in this blog constitutes financial advice and is simply the writer's opinions. Do your research and be aware of the risks of potentially losing all of your money.
