Moonpot : The TVL problem

Moonpot started with a favorable promise: the possibility of relying on Beefy vaults – and thus in a way on Beefy’s TVL (about 1 billion).

 Yet after 7 months, Moonpot’s TVL is still low. In this article, we will analyze the reasons and understand why it is necessary to rethink the lottery system.

Case study – BSC’s TVL

Moonpot’s pots use Beefy vaults. A part of the yield (50%) is recovered by Moonpot to finance:

– a) the lottery of the concerned pot

– b) the fees (income of Moonpot)

As with many DeFi protocols, TVL plays an important role since it generates most of the revenue.

That being said, one should not venture to make a crude comparison between Moonpot’s TVL and Beefy’s TVL since the way revenue is generated is not quite the same.

Moonpot charges about 10% in fees while Beefy charges 4.5%. Moonpot therefore needs about twice less TVL, under equal conditions (e.g. a CAKE vault vs. a CAKE pot) to generate the same revenue.

However, Moonpot cannot foolishly replicate the vaults found on Beefy.

At least not with the current system.

As the goal is to finance a lottery, the pots created on Moonpot must meet two conditions:

– Have a high APY
– Have a significant TVL potential, especially based on the corresponding beefy vault

These two conditions are « mandatory » in the current system, especially because :

– the draw time is 2 weeks maximum
– 50% of the yield is taken

These limitations prevent many Beefy vaults from being used on Moonpot. Moonpot can therefore not significantly increase its TVL and its number of players.

The Moonpot BSC and Beefy offer an interesting comparison.

This image shows the TVL BSC of Moonpot. After 7 months, the protocol has secured about 13 million USD of TVL.

This image shows the TVL BSC of Moonpot. After 7 months, the protocol has secured about 13 million USD of TVL.

In comparison, Beefy’s TVL BSC is 135 million.

So there is a ratio of 10 between Beefy and Moonpot on the BSC.

This discrepancy is simply due to the few pots on Moonpot compared to the vaults on Beefy.

This image shows the TVL BSC of Moonpot. After 7 months, the protocol has secured about 13 million USD of TVL. In comparison, Beefy’s TVL BSC is 135 million.

So there is a ratio of 10 between Beefy and Moonpot on the BSC.

This discrepancy is simply due to the few pots on Moonpot compared to the vaults on Beefy.

Beefy has 185 vaults on the BSC. Moonpot has only 9 pots on the BSC.

This large gap in terms of vaults/pots inevitably translates into a lack of TVL and a lack of revenue for Moonpot. The lack of pots is also problematic as it limits the opportunities to attract players due to the lack of tokens.

More worrying, Beefy’s TVL BSC follows a well known distribution in marketing, the long tail.

The majority of the Beefy TVL is composed by « small vaults ». If we put aside the big ones, like Cake or Bifi Maxi, the rest is composed of vaults with modest TVL.

Nevertheless, it is their important number, more than 150, that allow Beefy to reach a substantial TVL.

And this is where the mast hurts.

At the moment, Moonpot cannot take advantage of this long tail because these small vaults cannot work in the current system. Either the APY is too low or the TVL is low.

 

This image shows 6 vaults that are present on Beefy. None of them are on Moonpot. These 6 small vaults represent a combined TVL of 6 million.

In the current system, they can’t become pots. The TVL would be too low/APY would be too low.

That’s why the system needs to be changed/improved.

 

What solution?

1) Common pot as explained here

2) Changing some drawing aspects: The Banana’s pot example

Moonpot’s Banana Pot can be used as an example to project yourself.

It’s a good starting point for two reasons:

1) It can be seen as profitable for Moonpot a priori since it is maintained.

2) The associated Banana vault at Beefy includes an average TVL of 1 million USD.

 

 The APY of the vault on Beefy is 65%.

50% of the APY is used to fund the Pot Lottery on Moonpot.