First of all, I'm just rambling here. It's just an attempt at trying to understand the world. By no means is this financial advice. What am I saying, by no means this is anything other than me rambling on a cozy Saturday afternoon in Lisbon.
So let's take things one at a time, shall we?
The Facts Of Fox
A couple of days ago, ShapeShift, the DEX behind MetaMask, Ethereum's popular wallet, ran an airdrop of their own native token FOX. Not everybody was eligible for that, as some of my followers quickly commented on my other post, but some of us were.
FOX is a shrewd token (any fox is, obviously). But it seems to me that this one is particularly different.
One of its use cases, boldly noted in the Benefits section of the official website is this:
10% of the value of your FOX Tokens can be repaid to you each month for gas costs on trades. With enough FOX Tokens, this can potentially offset all of your gas costs on trades. FOX Fuel replenishes 30 days after it's used.
But that's not the only use case, the plot thickens:
Providing liquidity into the FOX-ETH pool. Then stake your LP tokens on ShapeShift to earn FOX bonus rewards.
At the moment of writing, the APR was (please breathe) 651.1297%. Of course, the more people join the pool, the lower the API is, but that's another story.
Stop.
Quick recap.
You get a token airdropped that can be substituted for gas fees (only 10% of the value of the tokens you hold, but still). You also create a liquidity pool, in which you can earn APR, by staking ETH / FOX.
Hmmm...
We already know that in a liquidity pool, you end up with less of the tokens that are appreciating, the (in)famous impermanent loss thingy.
Scenario 1 - FOX appreciates
So, if FOX appreciates, you end up with less FOX tokens. Which, interestingly, means you end up with more ETH. You're literally making more ETH because FOX is appreciating.
Scenario 2 - Fox depreciates
For simplicity, we'll read this as "ETH appreciates", which means you end up with less ETH, but with more FOX. You lose ETH, but you make up in FOX.
What This All May Mean
If FOX appreciates, you're incentivized to keep ETH staked (not moving it around, that is, you make more of it just by keeping it still, because impermanent loss).
If FOX depreciates, you're incentivized to trade ETH (to move it around, trying to avoid impermanent loss), and that trading will be supported by the transaction fees which are offset by your increase in FOX tokens. So you end up trading more ETH because it's cheaper to trade.
What just happened is that, literally, FOX decoupled gas price from the network congestion metric, and moved it to another token (that's the part where I'm rambling, if you didn't notice that already).
I find this quite shrewd.
So, because gas fees are not now in the miner's only realm (or they are not controlled only by miners, because you get 10% in FOX) you can take a shot at speculating on gas fees, as a function of ETH tradeability.
The only thing that's missing from tis beautiful setup is a decentralized exchange, where you would move around ETH and FOX not being worried about custody or high fees or whatever.
Oh, wait... I forgot about ShapeSift, which is exactly that, lol.
So, although FOX release may have gone a bit unnoticed, I think it has really great potential to streamline people's experience on ETH DeFi, which was literally plagued by extremely high fees.
Caveats:
- only 10% of your FOX tokens are eligible for gas fees, as far as I understand.
- contract fees for DeFi are still relevantly high, so some thorough research before moving ETH around wildly, knowing that you're backed up by FOX, is still required
- if FOX is getting wildly gambled by whales, you may end up on the bad side of the trade, literally within minutes
All in all, though, FOX is shrewd move.
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Great find as a news gem. I hadn’t heard about this…
Thanks
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