.. or why you should farm/HODL $ACS for the long-term
Table of Contents
What is ACryptoS and ACS Token?
Utility of ACS Token
Buybacks vs Burns
Security Track Record
ACS as a DeFi Yield Index
Closing Notes
With the cryptocurrency space gaining momentum on the back of institutional interest and investments, the total crypto marketcap has experienced a 500% growth (as of 27/06/2021) on a year-on-year basis, even after a deep 50%+ pullback in the prices of crypto assets. Whether we’re in a tech bubble or not is debateable, but one thing is clear: Crypto has outperformed traditional markets in the recent past, and it is here to stay. Since last year, the crypto craze has been fueled to some extent by the rise of decentralized finance (DeFi) projects on Ethereum, such as Aave (lending platform), Uniswap (decentralized exchange), and Yearn Finance (yield optimizer).
After the successful launch of Binance Smart Chain in September 2020 and the exponential growth it has experienced ever since, there are a number of high-yield opportunities within the DeFi ecosystem for alpha-seekers. In this article, I will aim to breakdown the self-sustaining tokenomics of the governance token of ACryptoS: ACS; or why you should farm/HODL it.
What is ACryptoS and ACS token?
As per the documentation: “ACryptoS is a yield farming optimizer designed for the longer-term investor who values sustainable tokenomics, safety and careful risk management”. ACryptoS is the 17th biggest project on BSC right now according to Defistation with $170M+ total value locked (TVL), and offers 65+ yield-optimizing vaults/strategies from PancakeSwap, MDEX, SwipeSwap and Venus.
ACS is the main governance token of ACryptoS (along with ACSI) that has followed a fair-launch process whereby apart from a 8888 initial token mint, all ACS released to date has been farmed by users. ACS tokens are offered as an incentive to users for supplying liquidity to the protocol for different vaults. How much ACS is emitted to each vault daily depends on the weight factor assigned to it, which ranges from 0.1x to 30x.
ACryptoS is governed through a DAO, and all core governance proposals are voted upon by the community to help steer the project in the right direction. In January, the maximum supply of ACS was capped at 1.88M and a supply reduction schedule was also approved which allowed for a 18.65% every 90 days. Daily ACS emissions were initially 3,669 ACS per day, these were reduced to 2,985 ACS in February, and have now been recently reduced to 2,479 ACS per day. The current circulating supply of ACS is 750K~, and it will take 5+ years for the full circulating supply of ACS to be distributed through farming.
Utility of ACS Token
So why would you want to HODL ACS token instead of selling it? 3 simple reasons:
1. Voting power in governance proposals based on ACS in the ACS vault
2. Deposit in ACS vault to earn a high yield through auto-compounding
3. ACS in the vault 2.5x boosts your farm rewards for all offered vaults
- Voting Power of ACS
Since ACryptoS is a decentralized project, any core changes/upgrades or budget spends are voted upon by ACS holders through governance proposals. Holding ACS allows you to voice your opinion for the improvement of the overall project.
2. Earning Yield through ACS Core Vault
ACS core vault has 5 sources of yield, making it an attractive option for ACS holders:
a) 23.25% of daily ACS emissions are distributed to the ACS core vault
b) 25% performance fee on all vaults is used to buyback ACS and distribute to the ACS core vault
c) 0.1% withdrawal fee on all withdrawals is used to buyback ACS and distribute to the ACS core vault
d) 10% withdrawal fee on the ACS core vault is re-distributed back to the ACS core vault
e) 0.03 ACS harvest fee for ACS farms is collected and re-distributed to the ACS vault
Through the above 5, depositors in the core vault are able to earn a triple-digit APY on their ACS deposits while keeping the ACS inflation rate in check. The variety of revenue sources for the core vault makes it a good option for ACS holders.
Buybacks vs Burn
In this reddit post by BlightNight, the topic of buybacks vs burns is discussed. Instead of burning ACS that is bought-back through the generated protocol fees, the bought back ACS is redistributed to the core vault instead to value user commitment to the protocol and generate extra yield for the ACS depositors. There is a log of ACS buybacks maintained by Unrekt.net which shows that ACS buybacks are growing overtime, coming to par with the ACS being emitted to farms each day, thereby closing the inflation gap.
Security Track Record
At ACryptoS, security is paramount to all other factors because what good is a triple-digit APY if the user funds are not secure? As a commitment to safety, ACryptoS has received 4 audits so far from Hacken, Certik and DeFiYield. Since inception, all vault offerings on ACryptoS have only been added after due diligence to minimize the risk of offerings on the ACryptoS app. Here are a few items we check against before adding new offerings:
- Does the protocol have security audits from credible sources?
- Does the protocol offer some innate value or is it just a pure farm?
- How much liquidity is currently present on the protocol? If it is too low, then the vault offerings will probably not be added.
Along with the above, ACryptoS is designed in a manner that avoids over-reliance on external price oracles that could potentially be exploited in a flash loan, and also minimizes the use of multiple protocols to generate yields. All vault offerings allow ACryptoS the direct control of funds on the protocol to prevent damage in case a third party experiences a security breach.
ACS as a DeFi Yield Index Investment
Here is a unique perspective on the ACS token: A DeFi yield index investment. ACryptoS currently has over 70 vault offerings with many LP vaults giving yields in triple digits. However, taking part in an LP could mean exposing yourself to the risk of impermanent loss, and some people may not be very comfortable with that idea. If you’re looking to gain an exposure to the high yields on credible BSC protocols without wanting to purchase the underlying assets or LPs, buying the ACS token can be a good option for you. 25% performance fee on all vaults is used to buyback ACS and re-distribute it to the core vault. By holding the ACS token you can gain an exposure to the yields of all vaults offered on ACryptoS through the 25% performance fee.
Closing Notes
Please note that this in-depth take on the ACS token is not financial advice, and you are encouraged to do your own research before deciding to buy/hodl/farm ACS. This article serves as a starting point for understanding the tokenomics and fee structure that support ACS as a token, and how/why the system is designed to benefit long-term holders in multiple ways. The tokenomics of ACS are self-sustaining whether it is a bull or bear market, and with continued development on the platform, the long-term value of the token will only increase.