The Great Switcharoo

The Great Switcharoo in a nutshell

typed on a faulty keyboard, and brain I have not used in years

Pickles.
Many people mistake pickles to be just another food token, this assumption is incorrect. Pickles is in fact on the frontier of a whole new era of finance. However, I’m not here to talk about that - I’m here to talk about the Great Switcharoo which is complete and utter conjecture about the future behavior of the pickle farmers.

It begins in the next few hours, maybe after this load of bollocks is published, who knows - it could be within hours or weeks, but what I can almost guarantee is that it will happen at some point. Of course, not everyone has the background on what I actually mean by the Great Switcharoo - this short essay will try to explain that in simplified form.

Laying the foundations to build upon

In the next couple of days something will happen to pickles which will undoubtedly shake the foundations of the current purpose of the token. It will be a fully fledged governance token which will have to be staked in order to vote in any pickle governance proposals and more importantly, it will be a magnet, when staked, for surplus fees after the treasury is full. The fee in question is the 0.5% that pjar users have to ‘pay for the pickle service’ to withdraw their funds.

Okay, and what?

This is where it gets interesting because now pickles has a purpose aside from being a token you farm or provide liquidity with.

I have a number of assumptions to make the conjecture possible:

  • Demand will, and is already organically rising because the project is heading in the right direction - super developers with a very intelligent and thoughtful community. We have seen the developers and community really get behind the project since it’s inception and there is no reason to suggest that is going to stop any time soon.

  • Audits are being done as we speak, after which pickles will seem like a far more trustworthy option for farmers and interest hunters - so I assume that TVL will rise enough to make pickles a very vibrant place to be over the coming weeks. Moreover, audits allow pickle.finance to feature on very popular defi websites with real market capitalization etc.

  • I am pretty much assuming that pickles will head in the right direction without any major hiccups between now and the Great Switcharoo.

How the Great Switcharoo begins

Sometime over the next couple of weeks, if not days, I propose that pool2 liquidity providers will start to withdraw their liquidity and use the ether to buy pickles because of a number of reasons which begin to make up the Great Swicharoo under the assumptions listed above (pickles as a project is extremely bullish).

The best being (Ceteris paribus):

  • Rewards halve to roughly 0.7% interest a day on Friday, and then down to as little as 0.35% the following Friday, and then dropping every Friday after that by 10% which means that each of us is probably best served unpooling and investing the ether into pickles to increase our pool size more than it likely would increase within the next few weeks by being a liquidity provider - even likely surge to somewhere back to 55 dollars would net you more pickles if you were to pool again (so even if you forget about the bullish sentiment and pickles becoming a fully fledged fee paying governance token this is actually the smart option at this point, assuming you believe in thee project)

  • The truth is that at this point it will probably take years to actually farm enough pickles to double your liquidity pool pickle stack (and that is without bringing impermanent loss into the equation), and the likelihood that pickle will outperform ether (at least in the short term).

  • Pickles will be a fee magnet within the next two days, sure, the fees at first may be low but I am willing to bet there are other crazy buggers out there who are already dreaming of pickles becoming the hedge fund of the future - these individuals want the risk because the reward is so good, again, with the assumptions above. I know individuals don’t like the following comparison but I am assuming again that pickle will continue on the same trajectory it has been on for the last few weeks in terms of developing and community strength.

The pickle.finance TVL in pjars alone is ~133m and the picklemarket cap is currently ~28m
The yearn.finance TVL is ~760m and the governance token (YFI) has a market cap of ~762m

This is not an easy comparison obviously, pickle has obstacles to come over like what happens when UNI staking stops and I am realistic about that, but so are the developers who are tirelessly working to implement the next pool to keep the TVL high. However, you get my point, as a fee paying governance token pickle is super under-priced, and I personally think YFI is under-priced too.

The Great Switcharoo demand side

Combine these two together, and you get to see just the tip of the Great Switcharoo iceberg. The best is yet to come.

The Great Switcharoo describes the behavior individuals will undertake once they have the realization of what is about to occur. This culminates in increased demand because of the numerous reasons explained above, i.e

  • Trustworthy and hard working developers who are by my guess serious ethereum developers who are remaining anonymous so that they can build on top of ethereum

  • A mature and knowledgeable community who are united in their efforts to see pickle.finance succeed

  • Auditing which opens the doors to exchanges, websites and more risk-averse investors into pjars and even pickle itself

  • Increased incentive to try and profit off pickles as an asset, rather than just as a farming tool because interest rates are decreasing weekly while we still have volatility as a small market cap in a market which will continue to grow (DeFi)

  • The reality that pickle.finance could genuinely become a profitable DAO with all surplus fees paid to pickle stakers

The Great Switcharoo supply side

While that is happening to the demand… what is happening to the supply? It’s slowing down, in fact, there are more pickles in circulation right now than will ever be added to the circulating supply, i.e pickle supply will never be double what it is now.

Remember the assumption that individuals will pull their liquidity out because they want pickles now - because they realize that they will not be able to farm at the same interest rates again, and this is their last chance to get a big bag of pickles? Under the assumption that liquidity providers will start to realize that they are better off holding pickles for price rise gains, or/and governance… The current liquidity providers will start to depool from pool2 before putting some, if not all of that ether into pickles (depending on their risk level and how much they like the project).

The Great Switcharoo

Because of all the reasons above, I think it’s fair to expect more and more people to start to depooling some of their liquidity from pool2 and switch the ether into the pickle. The Great Switcharoo.

10 Likes

Thanks @Scotty for sharing your view. I was thinking along teh same line. Nice analysis.

I want to let you know have updated it @custos_adam

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The Ol’ Switcheroo lol thanks @Scotty, I really like your analysis of the Pickle game theory. Nicely done sir tosses coin

Whoa @custos_adam

It’s funny, I just posted in another thread and used the phrase “toss a coin” even before I’d read this. Great minds? Dull minds? Not quite sure.

@Scotty

This is a great piece of content! Well-thought out and well-written. I’d be curious to know if your analysis extended to projected pickle staking APY based on current valuations and transaction history? Like, what TVL will a pickle staking pool support before APY drops to be menial?

Another comment I have is about the general spirit of competitiveness w/ yearn.finance. Having watched YFI killers come and go, I think it’s important to carefully navigate this territory. YFI has built up a sizeable moat and a dedicated fan base. Many of us who own pickles also own YFI. It’s a great project and they build faster than almost anyone.

With that said, do I think we have a chance at growing vs. YFI? Absolutely! Is a “switcheroo” a possibility? Perhaps. The defi world is full of clones and open source contracts. There are very few things a platform can do to differentiate itself vs its competitors. This truth is both a strength and a weakness. It’s ultimately my opinion that the team with the best devs and best community will “win”.

Just a few of my thoughts on this great piece. You should consider creating a medium account and posting it there. I’d gladly share it!

Best

dubs

‘The only true wisdom is in knowing you know nothing.’
-Socrates
Perhaps we have great-dull minds :stuck_out_tongue:
I can’t get the Witcher song out of my head haha and now I am tossing coins to everyone :smiley:

What percent of Pool 2 users do you think will exit pool 2 and convert their Pickle to ETH, rather than ETH to Pickle?

The impact of the switcharoo depends on this answer.

Hey — honestly I’d be lying if I told you a figure. I can only speculate that it’s probably in the interest of those who started farming earliest or with the biggest stacks to consider pulling some of their pools out. Because they will be able to afford to pool and switcharoo some at the same time — however I know that there are individuals who have pulled their pools already like myself. There is no concrete way to estimate it (as far as I know)!

Man, this is a TOME! I love it! This little part confused my pea-brain for a moment though:

Rewards halve to roughly 0.7% interest a day on Friday, and then down to as little as 0.35% the following Friday, and then dropping every Friday after that by 10% which means that each of us is probably best served unpooling and investing the ether into pickles to increase our pool size more than it likely would increase within the next few weeks by being a liquidity provider - even likely surge to somewhere back to 55 dollars would net you more pickles if you were to pool again (so even if you forget about the bullish sentiment and pickles becoming a fully fledged fee paying governance token this is actually the smart option at this point, assuming you believe in thee project)

Which rewards are you talking about halving to roughly 0.7% interest? I don’t see any of the jars or farms yielding 1.4% interest as of right now…again, I got that lil baby pea-brain and I must be missing something hahaha.

LD

Hey, this is about the eth/pickle pool!