TraderJoe: a Snapshot!

What is TraderJoe? 

TraderJoe is a DeFi protocol and a DEX on the Avalanche blockchain, major competitor to Pangolin – “We combine DEX services with DeFi lending to offer leveraged trading. Our products are community driven which allows us to give fees collected from liquidation and swaps back to the users via our JOE/xJOE staking mechanism. JOE is a governance token that also rewards its holders with a share of exchange revenues”, as their CoinMarketCap bio says. 

TraderJoe has already flipped Pangolin, another avalanche DeFi protocol and DEX in terms of Liquidity – the two occupy the same position in the ecosystem.

 LiquidityTrading Volume 
Pangolin329,960,21058,503,557 (24h)
TraderJoe545,298,13734,819,333 (Calendar Day cut-off)

TraderJoe’s vision, is  “to make Trader Joe an R&D-focused platform for new DeFi primitives not yet seen on any blockchain — not just Avalanche.”

What's the Dev Team?

The two major core developers are Cryptofishx and 0xMurloc. 

Cryptofishx: @cryptofishx is a full-stack and smart contract engineer with multiple projects histories in Avalanche: @throwsnowballs, @Pandaswapex and @sherpa_cash. He most recently worked at FAANG and a crypto derivatives CEX. He also holds a master’s in computer science from a top US university. He has been in crypto since 2017 and got into Avalanche when it was introduced to him by a friend. 

0xMurloc: @0xmurloc is also a full-stack developer and product manager. Recently, he was Head of Product at a leading unicorn startup that went IPO recently. He holds an electrical engineering degree from a top US university. He has been a bitcoin holder since 2014, got into DeFi earlier this year and has been hooked ever since.

A full list of its development team can be found here.

The UI - It's so beautiful!

First of all, there’s a chart on trade function – you can see the latest price movements of the token you’re trading in the form of candlestick charts – unlike older DeFi platforms like Yearn. 

There’s also an auto switch chain functionality. If you try to connect to the platform with the wrong chain in your Metamask wallet, it tells you you’re on the wrong chain and automatically switches the chain for you – unlike older DeFi programmes like yearn.fi where you had to do it manually. Pangolin seemed to have copied this to their own UI as well. 

Live farms – harvestable yields are immediately reflected in real time, just like Raydium.

Functionalities on the platform

Right now, you can trade, farm, and stake on TraderJoe. In the future, you would be able to lend and borrow. See TraderJoe Thesis and Roadmap

The trading (exchange) and farming functions should be familiar to the seasoned DeFi user. What warrants more attention is the staking function and the role it plays in the TraderJoe platform. Farming rewards on TraderJoe are in JOE. 

What is JOE? Aside from being the farming reward on TraderJoe, it is the governance token that will allow holders to vote on community proposals. This, is a major reason why JOE can be very attractive, and why influx into the TraderJoe DeFi protocol is so staggering.

Furthermore, on TraderJoe, you can stake your JOE for XJOE to maximise to earn even more JOE. For every swap on JOE, 0.05% of fees are collected to the XJOE pool and used to buy back JOE tokens. When lending (BankerJoe) is launched, there will also be platform fees shared to xJOE participants. Currently, buybacks occur every 2 days. When you unstake you will receive all the originally deposited JOE and additional from fees. Over time, you’ll always earn more JOE by holding xJOE tokens.

You might wonder, why is Staking better than Auto-compounders? For example, an Auto-compounder for the AVAX-USDT LP that rewards you with JOE rewards auto-compounds your yield by selling your JOE rewards from yield farming to increase your LP positions. But this means you miss out on profits if JOE tokens increase price. 

For individuals who are interested in playing a role in the future governance of the TraderJoe DeFi protocol, this staking mechanism, which maximises their JOE holdings, and therefore their governance power, is also far more attractive than an Auto-compounder route. 

Tokenomics

The Tokenomics of the JOE token gives one even more reason to be hyped.

The token distribution follows a fixed supply of 5 billion (deflationary!), decaying emission model. 

There are no pre-sales, private sales or pre-listing allocations of the JOE token. (!)

All tokens are distributed according to the emission schedule. That means that the team funds and treasury funds are distributed at the same pace as the LP farms. This encourages decentralisation, and rewards early participation, which is why its adoption speed is so staggering.

The token distribution and token emission schedules can be referenced in the two diagrams below. Further details can be seen here.

Roadmap

The emission schedule is somewhat related to the roadmap of the project, which also tells us about the sustainability of the Platform. The roadmap is roughly as follows: 

  1. Phase 1: Taking the traditional AMM model but adding many small improvements. This phase is all about learning to get the fundamentals right.
  2. Phase 2: Offering lending, which combined with trading results in leveraged trading. This phase is about offering products still new to Avalanche.
  3. Phase 3: Serious research phase and our long-term vision for Trader Joe – to become an R&D hub for DeFi innovation. Some areas we’re looking at are limit orders and derivatives. 

The TraderJoe platform aims to become a R&D hub for DeFi innovation with a DAO governance structure. Votes are determined by JOE holdings. The risk of influence by whales and flashloan attacks are reduced by the requirement that voting power is granted only to those who are holding JOE tokens at the start of the vote.

 

Commentary and Forward Looking Analysis

As of 15th Sept, the trading volume of Pangolin is 51.21mm; and that of TraderJoe is 21.6mm. Joe-pairs also account for some 22% of all trading volume on TraderJoe. TVL: Pangolin: 321.64mm, TraderJoe: 542.84mm. TV/TVL for Pangolin = 0.159 and for TraderJoe = 0.0397.  

These figures support the hypothesis that “the dichotomy between trading volume and TVL change is that people are coming to TraderJoe for yield farming but not swapping. This is extremely bad because the difference between a farm token and a DEX token is its ability to generate volume, not necessarily its ability to increase TVL. Having a higher TVL is nice because you can enable users to trade better, but if TraderJoe’s TVL increases and volume stangates, the increase in TVL is useless” – as taken from an analysis doc from 0xkydo.

The fact that 22% of all trading volume is with a Joe-pair supports this unwelcoming hypothesis even more strongly – People are right now rushing in to farm JOE. If trading volume does not pick up, TraderJoe risks becoming a farm token, which is the familiar ending to a lot of new DEXs. They start as a DEX but because no one uses them as a swapping tool, they turn into a farm and slowly bleeds out. 

This worry might be overblown, since we could expect trading volume on TraderJoe to shoot up once BankerJoe (lending and margin functions) are released, ceteris paribus. In comparison, Pangolin does not have lending services, nor does it seem to be part of their roadmap. Discussions on lending on the Pangolin discussion forum didn’t seem to be going anywhere either. It doesn’t help  when one of the search results on Pangolin’s discussion forum for lending is a big fat question of “Is it over for Pangolin?”

Also note: 74% of USDC.e is on TraderJoe, Pangolin has 26%. That’s surely a strong indication of activity on the TraderJoe platform.

However, one should note that lending is extremely competitive and difficult to do, and oftentimes making a DEX an attractive target for attacks as much for trading.

On the other hand, “We can see that TraderJoe’s TVL is not inflated with its native token pool and therefore provides deeper liquidity for Avalanche’s ecosystem – A bullish sign. This has its drawbacks since the price of Joe is more susceptible to sharp price movements.” 

Furthermore, single side staking for Pangolin is going to dry up a lot of its liquidity. Currently, out of its 234m liquidity, 77m is in its PNG-AVAX pair (32%). Staking will take away a lot of this liquidity, further decreasing its TVL and increasing slippage for traders.

Some further notes on the PGN and Joe tokens: 

  PGN (Token) JOE (Token)
Price 2.00 1.96
Market Cap 99mm 157mm
FDV 1,077mm 977mm
Circulating Supply 49.9mm 80.6mm
last 24h trading volume 4.6mm 15mm
Total Supply 538mm 150.7mm
Max Supply 538mm 500mm
TVL (automated) 330mm 538.2mm
MCap/TVL 0.302711 0.292956
FDV/TVL 3.263659 1.816635

Note that JOE’s circulating supply is far from its total supply. If we assume price to be linearly correlated with circulating supply, at full emission, we could be looking at $3.66 for JOE. The maturing of the TraderJoe platform vis-a-vis BankerJoe, coupled with Pangolin development inaction could push interest in holding JOE even higher.

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