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Analyzing Ribbon’s revenues, supply and community in light of the recent bear market
Bear markets make a prime ecosystem for young thriving startups to adjust and make their presence noteworthy. This phase allows companies to consolidate in order to come back stronger. Essential dynamics are needed to endure a prolonged bear market. Some key factors in crypto are: revenue, total value locked (TVL), users of the product or service and a community to support it.
Through this article we cover an early-stage protocol that has managed to sustain its growth despite the market downturn. Ribbon Finance is a decentralized structured products protocol, which automates option selling strategies for depositors to generate yield on their assets.
Revenue is the total amount of income generated by the protocol. In Ribbon’s case, its revenue comes from the premium gained from selling options.. On the graph below Ribbon Finance’s monthly revenue from inception and the fully diluted token value since its launch can be seen.
Source: IntoTheBlock & TokenTerminal. As of May 25th, 2022
As depicted on the graph above, Ribbon Finance has managed to maintain a healthy protocol income regardless of the market state. May still has not ended, hence this month’s revenue is incomplete. Taking into account the proximity to the end of the month, the protocol is most likely to experience a slight decrease in revenue.
This brings us to the protocol valuation in the highly correlated crypto market. Due to the nascent market, crypto assets still carry a high correlation to Bitcoin which nowadays carries a high correlation to the stock market. This means that if Bitcoin decreases in price, most likely the rest of the market will follow. Ribbon Finance’s revenue has grown 80% in the last 180 days and over 8000% in the last 365 days. Despite this the fully diluted protocol valuation has plummeted, likely due to the macroeconomic pressures.
Another key metric to measure Ribbon’s growth is its total value locked (TVL). In Ribbon Finance case revenue derives from the amount of deposits it has. The greater the deposits, the greater the revenue. The graph below shows the protocol’s historic TVL.
Source: IntoTheBlock & DeFi Llama
In this case, deposits go into Ribbon’s vaults. This consists of speculative vaults integrated with market options strategies. By implementing this the protocol is able to produce attractive organic yield. The biggest propeller for DeFi’s growth has been the yield generating opportunities. Ribbon’s ability to sustain appropriate TVL levels during the market downturn points to the demand for its product. Positive TVL values relate to user satisfaction and trust on the protocol’s ability to deliver accordingly.
DeFi Protocol’s engagement with its token holders has represented a challenge in the past. Curve led the way in trying to solve this problem with the ve tokenomics model. In this way protocols are able to interact with its users and token holders in a positive loop, while also alleviating market selling pressures from the diminished circulating supply.
Back in March, Ribbon Finance introduced the ve tokenomics to its protocol. This allowed RBN holders to lock their assets and in return be able to vote which vaults get higher token distributions. In addition, veRBN holders also receive dividends paid in ETH from the revenue generated. In the chart below, a historic relation is made between the total RBN circulating supply and the percentage being locked through the ve mechanism.
Source: IntoTheBlock, DeFi Llama & Coin Gecko
As shown in the graph above, ve tokenomics on Ribbon Finance received fast adoption. Reaching on May 7th a 30% of tokens locked from the total circulating supply. More recently this percentage experienced a decrease when tokens from the protocol’s team and seed round investors came into circulation after their cliff time ended. This increased the number of RBN circulating supply from 67 million to 162 million and decreased the percentage locked from 22% to 16%.
This means that currently there are more tokens to be freely traded, including the ones from seed round investors. These investors include: DragonFly Capital, Nascent, Coinbase Ventures, Scalar Capital and Defi Alliance. Even though these are all crypto native firms and probably long term investors, as of now the increase on RBN floating supply represents a greater risk for the asset price.
A strong community represents the core of crypto ethos. The size of this community can be estimated by the amount of addresses holding a project’s native token. The greater the amount of addresses the bigger the community. During a market downturn, this indicator tests the strength of the protocol community. If the number of addresses start decreasing, it means that users are selling their tokens and the community is becoming smaller. In the indicator below a historic total addresses with a balance can be seen for Ribbon Finance’s protocol.
Source: IntoTheBlock
As depicted above, even though the protocol still stands at relatively an early stage, the number of addresses with a balance have been increasing since genesis. Still with a small community the protocol has 3.3k total addresses with a balance. During this downturn market, the number of addresses experienced a small decrease. Meaning the community managed to relatively preserve its size.
Bear markets bring demanding conditions to the whole industry equally. Best positioned and consolidated protocols will manage to survive and strengthen. Through the analysis done, Ribbon Finance shows promising signs in total revenue, TVL and community aspects. It also has well known crypto backers, which tend to have a long term investment view. Ultimately, despite the short-term negative price action it is showing signs of being able to sustain most of its growth through its organic yield-generating strategies.
Ribbon Finance Key Metrics Overview was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
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