A brief overview of Dinosaur eggs: Is it a multi-project mechanism stitching, or a paradigm upgrade of DEX?
Research Institution: Mint Ventures
Researcher: Xu Xiaopeng
Last updated: 2021.10.08
Project Overviw
#The #ProjectsOverView is a new section of Mint Ventures that focuses on new projects that have been online for a while, have innovative mechanisms and are of interest, and will be more concise than the #InDepthReport series. In terms of focus, the #ProjectsQuickFinder will focus more on business or institutional innovation and less on valuation analysis. It is important to note that new projects may have significant growth potential, but there is also a high degree of uncertainty about their mechanisms, stability and market competition.
We hope you enjoy our new attempt.
I. Highlights of the report
1. Core investment logic
Dinosaur eggs has a sophisticated token and mechanism design, with an impressive design for planning the benefits and responsibilities of multiple participants, the distribution of incentives to where the token output goes, the combined use of heterogeneous (NFT) and homogeneous assets, and a high degree of coordination between the core product modules. Its two disclosed businesses, Swap and Social, are new and old, in line with the general industry trend. There is likely to be significant room for growth in the project.
2. Main risks
The project has only been live for a short period of time and there are many uncertainties. Specific risks include derailment of project mechanisms, contractual risk, level of project governance / moral hazard, and competition from imitation boards.
3. Valuation
The valuation of Dinosaur eggs is extremely low in terms of PS (price-to-sales ratio) compared to the blue-chip Swap on the BSC, at 1/40th of Pancakeswap, but this valuation is only a rough reference given its pre-inflationary status and the relatively short development time of the project. This study will focus on qualitative mechanics and product analysis.
II. Overview of the project
1. Scope of business
The Dinosaur eggs project is a comprehensive project deployed on BSC. According to its official documentation, the project has disclosed business areas including Swap and Social, with the first product to go live being Dinosaur Swap, which focuses on trading. Its social product has not yet been launched.
2. Project innovations
From the products that have gone live and the official documentation of the project, the main innovations of Dinosaur eggs in comparison to other Swap projects are as follows.
a. Complex and elaborate token model design
Many well-known projects can be seen in the token model of Dinosaur eggs, including Curve’s governance lock-in (veCRV), DODO’s membership system (vDODO), Bakery’s NFT module, Kswap’s (Swap project on Okchain) transaction mining, and even the transfer burning mechanism for certain MEME-type tokens. So far, the whole set of mechanisms of Dinosaur eggs is working relatively smoothly, with a high degree of coordination and reinforcement between the various product modules.
An in-depth analysis of the project’s token model and business mechanism will be detailed in the [Token Model] section of [Business Analysis].
b. NFT and diverse scenarios
Dinosaur eggs has designed a relatively rich functional scenario for NFTs. Of the two types of NFTs that have been officially disclosed and launched so far (“Money-Hungry Dino” and “Meat”), their main functions are to obtain agreed income from projects and to act as market makers The main function of the NFTs is to receive the project’s agreed revenue and to act as a market maker to accelerate the LP revenue prop. In addition, the project has a built-in secondary trading market for NFTs and fragmentation of both types of NFTs to improve the liquidity and turnover of NFTs.
c. Differentiation of market transaction selection
In the early stages of the project, VAI (an over-collateralised stablecoin issued by Venus, the largest lending project on the BSC) was primarily chosen as one of the trading tokens for the many liquidity pools. Previously the stablecoin VAI had been out of its anchor price of $1$ for a long time due to a severe imbalance between supply and demand. After the launch of the Dinosaur eggs project, VAI was quickly pulled to near 1$ and remained unanchored for several days afterwards. In addition to this, the project also used XVS (Venus’ governance token) as one of the main tokens for the liquidity pool. Since then, Venus has started interacting with the Dinosaur eggs project on Twitter several times.
3. Project history
Token price trends
The project went live on October 2, 2021 and has been in operation for less than a week. Its core token DSG, as the early core mining material (commonly known as “shovel”), was contested to over $3,000 before the project officially started mining (when the project only pre-added 20 DSG tokens), and DSG was once pushed up to around $18 after mining started. The price dropped back to a low around $0.58 before launching a rally that has held near 1.3–1.8 for the last 3 days.
DSG’s price movements over the week online have stabilised as inflation has gradually decreased. from:
https://dex.guru/
Project big events
Although the project has been launched for less than a week as of today (10.2–10.7), the Dinosaur eggs project has been very active, and its Twitter feed has been updated with unusual intensity. Details as below:
2 October: project launch
3 October
· Start a liquidity mining incentive for NFT’s fragmented tokens to increase the liquidity of NFT’s fragmented assets
· Announced the Contributor Support Programme, stating that the Community Fund will be used to reward contributors in the areas of safety, artistic creation and community ambassadorship
· Gained retweets and attention from the Venus project on liquidity mining rewards for VAI and XVS
4 October
· Adjusted its DSG incentive distribution factor for the first time, lowering the incentive amount for liquidity mining, especially for the stablecoin liquidity pool, and increasing the incentive distribution for transaction mining
· Announced that all rewards accrued at official member addresses will be distributed to other members (a member is a user who pledges DSG, i.e. a vDSG holder, see the section “Token Model” for details)
· Lowered the invitation threshold for the membership system to encourage inviting behaviour
· Announced a partnership with Babyswap on BSC
6 October
· The first CEX listed DSG tokens is Lbank
· Announced that it will lower the threshold for the use of its LP revenue acceleration token “Meat”
· Started Babyswap token Baby’s liquidity and trading mining incentive
7 October
· Announced the opening of liquidity incentives and trading mining incentives for the RACA (NFT track project on BSC, with deep involvement of Musk’s mother)
· Re-adjusted the bonus factors for liquidity mining and trading mining, and made its core token DSG a counterparty asset for market making
· Membership system of over 1500 people
In general, the project’s first week of launch has been a relatively intensive one, with more action on its incentive allocation adjustments and business partnerships in particular.
4. Business situation
The current core data for Dinosaur Eggs are as follows:
The author believes that two of the most noteworthy metrics to look at are the LP funds turnover rate (per day) and the membership joining rate.
LP Funds Turnover (Daily) = 24 hour trading volume / Market Making Funds, used to measure the efficiency of a market maker’s funds turnover, the more efficient the turnover, the higher the return on the market maker’s funds fees and the higher the agreed income.
Dinosaur Eggs has a significantly higher LP fund turnover rate than other DEX platforms using the AMM mechanism. In addition, UNI V3 is also significantly more efficient in utilizing market making funds than traditional AMM platforms due to the use of the market making price range customization feature.
Another metric, member joining rate = DSG deposited into the membership system/total DSG supply, the higher the member joining rate, the higher the user retention rate of the entire system. Since the launch of the DAO, Curve’s token lock-in has been on the rise and is currently at 41.76%, an impressive result for Dinosaur Eggs in its first week of launch.
Of course, it should be noted that Curve’s CRV has both governance and access to agreed income distributions after locking, while DSG only has access to agreed income distributions after locking, and currently has no governance function for the time being.
5. Team background & investment institutions
The Dinosaur Eggs core team is temporarily anonymous, and no information about the project’s core personnel is publicly available at this time, although the project has been audited by Certik. The project was launched on a fair basis, with no financing or pre-sales, and no original shares set aside by the team in advance.
III. Business Analysis
1. Industry and competitors
According to the official documentation of Dinosaur eggs, the project is a comprehensive project that includes Swap, Social and other businesses, called “Dinosaur metaverse”.
Dinosaur eggs’ project home page, in addition to Swap (Defi) also reserved the entrance of social and other products. However, apart from swap, there is no definite launch date for other product segments, and the specific product shape and direction have not been disclosed.
At present, the order of explosion of blockchain business is: decentralized finance (DeFi), collectibles (art, avatar, trading platform) market with NFT, Gamefi (but there are fewer projects with larger scale and more sustainable except Axie).
The Social track of blockchain is in a stage where everyone is looking forward to it, and the industry giants are marching into it (decentralized projects are represented by Aave, and centralized institutions are represented by Twitter faction), but the representative products are less, and the Product market fit of the industry has not been clearly verified, and remains to be seen.
As for the Swap segment on BSC, Pancakeswap is in the absolute leading position in terms of user volume and business volume, occupying a large amount of trading volume of mainstream assets, while the upstarts have Babyswap project, which was selected for MVB Phase III, focusing on trading and market-making services for long-tail assets.
Although the business of Dinosaur eggs has started quickly, its trading pairs and number of partners are at an early stage, and it does not have much overlap with Pancakeswap and Babyswap for the time being, so it will not be a direct threat to BSC’s leading projects in the short term. competition.
2. Token model
Compared to the traditional Swap program, Dinosaur eggs’ token model differs significantly in the following main aspects:
a. More diverse types of tokens that can capture protocol revenue
There are both homogeneous tokens (FT) DSG and heterogeneous tokens (NFT) Money-Hungry Dino (Chinese name “贪财龙”), and DSG can be minted as vDSG, a membership rights token, and the level and parameters of Money-Hungry Dino NFT are different.
The token mentioned above are described below:
1. DSG
DSG is the core token of the project, its total amount and output model is similar to Pancakeswap’s cake, the total amount is uncapped, the output is regulated through governance (DAO is not launched currently), and deflation will be achieved through output regulation and increased scenarios in the future.
The role and value of DSG is captured primarily from
· Direct capture of trading platform fee income: part of the transaction fee will be used to buy back the destruction of DSG
· Cast vDSG, join the dinosaur clan members: Cast vDSG at a ratio of 100:1, get additional transaction fee allocation, DSG transfer burning allocation, NFT trading platform transaction fee allocation, NFT synthesis and other membership benefits
· Transfer burning deflation: DSG has a transfer burning mechanism, each transfer deducts five ten thousandths, of which three ten thousandths is directly destroyed and two ten thousandths is allocated to vDSG pledgees
· Used for NFT synthesis and card slot purchase
· In the mall system you can use DSG to buy all kinds of NFT
· Governance: DAO module is launched and can be used for proposal and voting
But the above is still only a small piece of the agreement value, if you want to capture more of the agreement value, you need to cast vDSG with DSG.
vDSG
vDSG casted by DSG based on a 100:1 ratio.
The value of protocols that can be captured by holding a vDSG includes:
· The entire membership system receives a bonus of 18 DSG per block
· Receive an additional 0.025% allocation of the platform’s 0.3% transaction fee, which is distributed to vDSG holders after repurchasing DSG
· DSG deducted 2/10,000% per transfer and distributed to vDSG pledgers
· Receive the distribution of NFT trading platform transaction fees
· DSG paid for upgrading Money Hungry-Dino and purchasing card slots (see “Token Model” for details) is distributed to all members
· Distribution of the cost of meat NFT usage to all members
· Members with more than 1 vDSG can invite other members to cast vDSG, 10% of the vDSG cast by the invitee will be the weight of the invitee’s membership, but this right cannot be redeemed or transferred, and will disappear permanently after the invitee and the inviter redeem vDSG
· When other users redeem vDSG, the refund fee charged at the rate will be distributed to the non-exiting vDSG holders in the form of vDSG.
NFT: Money-Hungry Dino
The total number of Money-Hungry Dino NFT is 20,000, 15,000 of which will be produced in 60 days in the form of egg fragments (a kind of homogenized tokens) in Pterodactyl Farm through farming, 10,000 egg fragments can be exchanged for one Money-Hungry Dino Egg NFT, Money-Hungry Dino Egg NFT can be seen as a blind box, after opening it, you will get a random Money-Hungry Dino NFT of level 1–6.
he higher the level of the dinosaur, the higher the “dinosaur prestige value”, and the end user pledges to share 13.3% of the 0.3% transaction fee based on the dinosour prestige value.
With DSG, vDSG, NFT, and NFT shard tokens, why did the project design such a complex multi-token system to capture the value of the protocol?
There may be more complex motives behind it, but I think there are three obvious benefits.
a. A more diverse token system, the introduction of NFT tokens, and the combinability between tokens can enhance the “gameplay” and “immersion” of the whole system. During the few days I dived in the project community, there were few users who said the project was “fun”.
b. The use of homogeneous tokens and NFT may leave ample room for the project to combine with other projects and the Social business segment in the future.
c. The existence of NFT provides more trading scenarios and creates additional protocol revenue.
b. Import of multiple gaming systems
The core business segments of Dinosaur eggs on Swap can be divided into 4 blocks: market making, trading, membership system, and NFT system. In each of these four business segments, the project side has fully introduced gaming design. Specifically:
· Market-making game: the game between market makers through the volume of funds, similar to the logic of traditional market-making, will not be repeated here
· Trading game: The game is introduced through the trading mining mechanism. Transaction mining means that the project provides token distribution rewards for trading behavior, and users get the token reward distribution according to their cumulative transaction volume share, the higher the cumulative transaction volume share, the higher the token reward. In this mechanism, a user’s past accumulated transaction volume is similar to “mining power”. However, as soon as a user chooses to withdraw DSG, his past accumulated transaction volume will be zeroed out, and in this process of zeroing out, the total arithmetic power of the system will also decrease, which means that the arithmetic power of other users who have not withdrawn their DSG rewards will increase, while the withdrawers need to accumulate arithmetic power from scratch through new transactions. The later the user withdraws the reward, the more DSG they will get, but they also need to bear the risk of DSG fluctuations.
· Membership system gaming: DSG’s membership system follows and is adapted from the vDODO membership system of another well-known Swap program, DODO. Holders become members of the program by casting DSG as vDSG, and the vast majority of the program’s agreement revenue is distributed to vDSG holders on a sliding scale. In other words, DSG holders do not capture most of the agreement revenue directly, but must cast vDSG through DSG to maximize the growth dividends of the agreement. This idea is consistent with the idea that only veCRVs in Curve can capture the revenue of the agreement. On the other hand, it is the responsibility of vDSG users to absorb fluctuations in the price of the project tokens while being allocated profits. To achieve this, Curve’s approach is achieved through a length of time incentive: the longer a user locks a CRV position, the higher the percentage of governance and dividend rights he or she receives. vDSG’s approach is achieved through an “exit burn” mechanism, unlike CRV, which cannot be redeemed after locking a position as a veCRV. The vDSG can be redeemed as DSG at any time, but the redemption will be subject to an exit penalty, which is dynamic. The higher the percentage of DSG in circulation and unlocked, the higher the exit penalty rate, and vice versa. It is important to note that the majority of the exit penalty will be distributed to other vDSGs that do not exit, meaning that vDSG holders that do not exit will not only receive the majority of the revenue from the agreement, but will also receive the majority of the penalty paid by the exiting vDSG holder.
· NFT system game: the project has disclosed that there are currently two main types of NFT (there are four official planning), one is the income NFT — Money-Hungry Dino, the other is the LP income acceleration NFT — meat, meat game logic is similar to market-making, no longer repeat. Here mainly about the game logic between the Money-Hungry Dino. The function of the Money-Hungry Dino is the daily commission dividend, but this system has two special mechanisms: 1. synthesis. 2 Money-Hungry Dinos of the same level can be synthesized into a higher level of Money-Hungry Dino, the higher level of Money-Hungry Dino dinosaur power value is a random interval, but must be greater than the sum of the lower level of 2 Money-Hungry Dino dinosaur power value. 2. combination. When the user collects a full set of Covetous Dinosaur from level 1–6, he can purchase a card slot (pay DSG) to pledge the whole set of Covetous Dinosaur, at which time the overall dinosaur power value (dividend weight) of the Covetous Dinosaur combination will be 5 times the sum of the original dinosaurs from level 1–6. Under this logic, if users want to maintain an advantage in the Money-Hungry Dino bonus competition, they must synthesize and strive to obtain the entire set of Money-Hungry Dino pledges.
It is this interlocking mechanism, and the full game between multiple participants, that the project owner hopes to form a “Schelling point” between multiple participants, where the benefits, costs and responsibilities of all parties are equal, and where everyone’s “selfishness” The “selfishness” of all is driving the growth of the project.
c. No more “liquidity is king”, multiple sets of incentives in parallel
As a fair start-up project, how tokens are distributed is crucial. Trading-based programs, as represented by Pancakeswap, direct their token incentives primarily to liquidity providers and pledgers of Cake tokens (commonly known as “mining themselves”). Dinosaur eggs, on the other hand, is more incentivized by traders (through trading mining) and members (through a membership system).
In my opinion, this is probably the better way to incentivize, because the increase in trading itself will directly increase the liquidity turnover of market makers, creating greater fee income for them and incentivizing liquidity providers while indirectly incentivizing market makers; adequate incentives for members will increase user retention and engagement, contributing more long-term value on the agreement. Directly subsidizing liquidity, on the other hand, falls short on both counts. Of course, no token incentive model is perfect and does not need to be adjusted, and the best incentive program must be constantly adjusted as the product and market change, which is perhaps why Dinosaur eggs has made two updates to its incentive weighting parameters within 5 days of launch (see “Project Happenings” above).
Token Summary
The Dinosaur eggs project has a large and slightly complex token model, and we can see shades of the token economy of many good projects, but the designers of the project’s token do not “simply stitch together” multiple mechanisms, but have a more holistic design, and through “The game is played to ensure that the contributions and benefits of multiple parties to the project are relatively balanced, and that they work together to advance the project’s development.
3. Competitive advantages
As of today, Dinosaur eggs is less than a week old, so it is still early to talk about “moat”. However, its complex and well-designed token model has a clear mechanical advantage over other Swap projects.
In addition, the team’s sensitivity to the project’s operational situation and the speed of adjustment are impressive.
Considering that the project is only one of the businesses online now, the combination of its design and existing mechanism in Social and other NFTs will be crucial to the future development of the project as a whole, and may be the “ winning hand “ of the project.
4. Project risks
As an early stage project, Dinosaur eggs also faces a number of risks, including:
· The project mechanism is off-track: the existing mechanism and token design of the project is huge and complicated, and the degree of interconnection between modules is extremely high. Although the current operation is good, the subsequent mechanism will still face the test of more complex situations. For example, if a large number of members quit in the face of the “burn mechanism” and a large number of transaction mining users withdraw their earnings and cause the price of the coin to fall, will it cause an irreversible “death spiral”? Will the project’s consensus hold up for now? This remains to be seen.
· Imitation discs: If there are imitation discs with similar mechanisms in the short term, it may divert the project’s traffic.
· Contractual risk: There are more modules of the protocol, and there is some contractual risk with the combination and calculation between modules.
· Project governance issues: The project does not yet have a specific plan for DAO, the team has a strong control over the project, its governance and ethical level is one of the biggest “single point of risk” of the project.
IV. Valuation
1.5 core issues
What business cycle is the project in? Is it mature, or in the early to mid stage of development?
The PMF (Product market fit) of the Swap class project has been fully verified, and the Swap module of the project is currently operating stably, but there is more room for adding trading pairs. And other product modules of the project are not yet online, the project is in the very early stage of development.
Does the project have a solid competitive advantage? Where does this competitive advantage come from?
The project mainly relies on a relatively excellent token design and combination mechanism to achieve a cold start and rapid development of the business, and the team’s acumen and adaptability are also relatively excellent. However, it remains to be seen whether the above advantages can be maintained in the fierce competition.
Is the investment logic of the project clear in the medium to long term? Is it in line with the general trend of the industry?
The medium and long-term investment logic of the project is bullish on the Swap track and the Social track in exploration, where the Swap track is very wide (despite the competitive incentive) and the Social track is bullish on many leading players and has greater potential for long-term development, but the business model is still in exploration. Overall the two disclosed businesses are new and old, in line with the general industry trend.
What are the main variable factors in the operation of the project? Is this factor easy to quantify and measure?
We mainly focus on the operation of the project mechanism at this stage. We need to comprehensively observe the LP capital turnover rate, membership ratio and other core indicators of the project, as well as the pressure bearing capacity of the project in the negative spiral. Externally, we need to observe whether there is a strong competitive imitation Swap and its actual diversion situation.
What is the management and governance of project? How about DAO of Dinosaur eggs?
At present, DAO module of the project has not been launched and there is no timetable. The core team is mainly responsible for promoting the project.
2.Valuation
The project is in the very early stage of development, and the potential for development and the uncertainty of operation are very high. #Project Overview research report also focus on the business or mechanism innovation of the project and despises the valuation analysis. Therefore, we only take PS(market sales ratio) as the horizontal comparison index to compare Dinosaur eggs with the benchmark Swap project like Pancake on BSC. The lower the PS value is, the lower the market value of the project relative to its protocol revenue is.
From the perspective of PS, Dinosaur eggs is very underestimated relative to Pancakeswap, and the PS of Pancakeswap is 39 times that of Dinosaur eggs. As mentioned earlier, Dinosaur eggs, as a newly launched project, is far more uncertain than a mature blue chip project. Before its mechanism and competitiveness are fully verified, it is difficult for the market to overestimate it at the beginning. In addition, Dinosaur eggs also faces relatively greater inflationary pressure. Nevertheless, from a valuation perspective, dinosaur eggs is still far from the ceiling.
3. Valuation Summary
Dinosaur eggs’ existing competitive advantage mainly comes from excellent token economy and mechanism design, and the team also has good sensitivity and coping ability. The project is in the absolute early stage of development. On the one hand, it has huge potential, also with uncertainty. From the valuation side, the PS valuation of Dinosaur eggs is far lower than that of pancake which is a mature project. It can only be used as a rough reference.
5. Acknowledgements and References
We are particularly grateful to the Dinosaur eggs community member xdord for providing the logic diagram of token economy.
Token Data Sources:
https://pancakeswap.finance/info
References:
Social Invested Area Analysis: Aave and Twitter rush to decentralized social media. What will be the ‘ next generation social network’ look like?
Curve In-depth Research Report: In-depth analysis of Curve’s attacking way: Business model, Competitive status and Current valuation
