Pylon Protocol’s proposition is simple - no-loss deposits. Instead of using the initial capital to make a purchase, the yield generated from the capital is used instead.
Besides depositing UST to invest with the yields generated, one can also stake Pylon’s native token $MINE. Up until recently, the APR % for Mine staking has been in single digits. Recently, this went up to 20% and have caught the attention of Mine holders on Twitter. But just how much does this increase affect Mine staking behavior?
In this article, we’ll look at the macro trends of Mine & Luna staking and unstaking and behaviors of users who have unstaked Mine.
Mine & Luna Stakers and Unstakers
In this first graph, we are looking at the number of people who have staked and unstaked Mine on a daily view.
On a daily horizon, the average seems to be in the range of 500 - 1000 stakers daily with several days reaching 1500. The number of unstakers on the other hand are usually on the range of sub 300.
For context, Pylon was launched 4 months ago and to date, the number of unique Mine stakers is 31853. On the other hand, there is about 1.6M Luna stakers and around 8k StarTerra (STT) stakers.
As for number of Luna stakers and unstakers, the trend is not too different.
The number of stakers daily seem to be in the 1000 range with spikes of 6000 daily in the recent weeks while the number of unstakers is around 500.
These numbers are very comparable to that of Mine stakers and unstakers even though the number of Mine stakers are in the 30k’s as compared to Luna stakers in the millions. This is evidence that having a lock up period like in staking Luna contributes to both resistance to stake and unstake as compared to Mine which has no lock up period.
Effect of price actions on Mine staked vs Luna staked
Next, we can compare the amount of Mine staked with Luna staked and see if the price actions for both coins affect staking behavior.
Let’s start with Mine staked vs Mine’s price.
There are several notable trends here.
When Mine’s price shot up from July to mid August, the number of Mine staked shot up as well.
However, since the ATH staked amount, staked Mine has been on a decline until October
Mid October is when we see Mine prices free fall but Mine staked increased instead. What’s happening here?
Here’s what I think happened. When Mine launched, hype around the future of the project brought its prices up. This hype included benefits that Mine stakers would get - for e.g. access to new token sales, more allocations for token sales, just to name a few.
However, as new projects launched on Pylon without any clear benefits to Mine holders, the number of staked Mine began to decline. As more FUD circulate, the price of Mine crashed. Users who were providing liquidity for the Mine-UST pool face a lot of impermanent loss and seek refuge by taking out their liquidity and stake Mine instead (hence the increase in Mine staked).
Let’s see if any of these trends apply to Luna staked as well - comparing with the same time range post Pylon’s launch on July 2.
As Luna price rallied from July to Nov, there is a decrease in total Luna staked although this change is very small. Because it takes 21 days to unstake Luna, it seems that people are not inclined to unstake their Luna despite Luna prices soaring.
This is in line with what we found earlier where the number of stakers and unstakers is also comparable to Mine even though the number of Luna stakers is 60 times more than Mine stakers.
It’s evident that staking with a locked period promotes stickiness but is the inverse true?
How long do people stake mine for?
Given that there is no lockup period for Mine staking, anyone can withdraw their staked Mine at any time. We see that the staked amount is more volatile due to this but as of now without any lockup period, how sticky is staked mine?
To identify just how sticky is the staked Mine, one approach is to look at addresses who have staked Mine then completely unstaked Mine and find out just how long was their staking period.
The chart above shows the percentage of users who have completely unstaked Mine as compared to those who still remained staked. This 18.6% group translates to 5937 users. Next, we examine the staking period distribution of these 5937 addresses.
On the x-axis, we have the date difference between the time when someone started staking and the time when they completely unstaked all of their Mine tokens. And on the y-axis, we have the number of addresses that correspond to the number of days staked.
Interestingly, there is a total of 144 addresses who staked and unstaked on the same day - perhaps testing the waters.
I also took the average time staked and that came out to be 38 days. This is not as bearish as you might think considering these group of addresses have completely unstaked Mine (representing 18.6% of total Mine stakers) and it took them on average 38 days to completely unstake.
What do people do after unstaking Mine?
As of now, there are only 3 things one can do with their Mine (apart from staking): swapping it for another asset, providing liquidity and simply holding it.
From the 5937 users who have completely unstaked Mine, what do they do with their Mine? First, let’s look at the liquidity providing.
Immediately after unstaking Mine, about 25% of users used their Mine to provide liquidity in the Mine-UST Pool.
The number of users who swapped Mine to UST on the other hand surpasses those who provided liquidity.
A whopping 71% of those users swapped out their Mine for UST. Granted, let’s assume that all 25% who provided liquidity needed to swap half of their Mine to UST, this still leaves us with at least 46% of Mine users who have ‘exited’ the Mine ecosystem.
In the best case scenario, this breaks down to:
25% provided liquidity
46% swapped Mine for UST to exit the Mine ecosystem
30% held Mine in wallet/transferred to other wallets
To me this is still not as bearish as it might look because bear in mind that these group of users have completely unstaked Mine; so for 25% of them to start providing liquidity after unstaking shows they still have some hope for the Mine ecosystem.
Given all that we know now, is it wise to implement a lock up period for Mine?
A benefit to introducing a lock up period for Mine would be an increased resistance to unstake. However, one could also argue that staking Mine does not go towards securing the network unlike staking Luna, and this might cause more people to not stake Mine in the first place.
I think the issue with staked Mine is that it does not provide a clear benefit or narrative for people. With Luna, one can buy into the narrative of securing the network long term while earning more Luna. The same can’t be said with the current benefits of staked Mine.
However, if Pylon protocol introduces value capture for staked Mine (like earning a portion of Pylon gateway fees or allocation for new token launches), then it would make sense to introduce a lock up period.
TLDR Conclusion
The number of stakers and unstakers for Mine and Luna on a daily basis are in the same magnitude range even though there are 60 times more Luna stakers than Mine stakers.
The amount of Luna staked did not change as much even though Luna prices soared. Amount of Mine staked on the other hand saw more volatility and towards the end, increased as Mine prices fell.
Both of these evidence point towards lock up periods contribute to stickiness of staking and unstaking
We also see about 18.6% of Mine stakers have completely unstaked so far and the average staking days for Mine is 38 days.
After these group have unstaked completely, about 25% of them provided liquidity for the Mine-UST Pool while at least 46% of them have swapped out Mine to UST.
Link to graphs on Flipside: https://app.flipsidecrypto.com/dashboard/mine-2-governance-staking-of-mine-over-time-ZCtUXk