Recently, the Ellipsis project attracted attention when it “migrated” from EPS to EPX, thereby applying the veToken model (Vote Escrowed Token) to help increase the applicability of its token like Curve. This leads to a short-term increase in the price of the project token.
An Overview of Ellipsis Finance
Established in March 2021, Ellipsis is an AMM-based decentralized exchange on the BSC ecosystem, dedicated to stablecoins (BUSD, USDC, USDT, DAI…).
Because of this relationship between Ellipsis and Curve, users can also benefit from the veCRV token. Specifically, veCRV holders will be rewarded in the form of EPS tokens for one year.
Ellipsis 2.0
To mark the new transformation of Ellipsis, the project has announced the development of version 2.0 with many new features, especially the successful application of the veToken model in Curve to increase the use case for EPX’s new token.
Specifically, the new features are:
- Increase voting rights when locking tokens.
- When you lock tokens, you will be rewarded with project fee revenue.
- Increased rewards in LP pools when locking tokens.
In addition, the EPX token will have some changes compared to EPS:
- The total supply will increase from 1 billion to 1.5 billion tokens.
- The maximum total supply will increase by 88 times, to 132 billion tokens (which is 88 times 1.5 billion).
Users will receive 88 EPX for each converted EPS.
Besides, 1% of the unblocked EPX supply will be used as an incentive reward for users. At the same time, the token issuance rate will be as follows:
What’s special about the project’s new token, EPX?
The project team has applied the veToken (Voted Escrowed Token) model like Curve’s to EPX.
Therefore, EPX will have new special features as follows:
You will receive VlEPX by locking EPX
Specifically, the minimum lock time is 1 week while the maximum is 52 weeks. The number of VlEPX you receive each week is equal to the number of locked EPX multiplied by the number of weeks remaining before the lock expires.
For example, you lock in 10 EPX in 10 weeks:
In the first week, you will receive 10 * 10 = 100 VlEPX.
Get 10*9=90 vlEPX the second week.
The third week will receive 10*8=80 vlEPX.
After 10 weeks, you will receive 0 VlEPX and can withdraw your locked EPX account.
So what benefits will VlEPX owners receive?
First, vlEPX holders will receive a reward from Ellipsis’ transaction fees.
Specifically, each transaction in Ellipsis has a fee of 0.04%, of which 50% will be divided among liquidity contributors for pools and the rest will be divided among vlEPX holders.
In addition, VlEPX holders can also receive more rewards from pools.
Similar to Curve, the more you own vlEPX, the yield will increase accordingly, up to a maximum of 2.5 times compared to non-vlEPX holders.
Next is the weekly vlEPX holders have the right to vote on the pool that Ellipsis will allocate EPX to as a reward.
This means that the pool that receives more votes, the greater the EPX reward for that pool’s liquidity provider.
For example, in the picture, after a week, the 3EPS pool received the most votes with a rate of 61.4%, so it will be allocated 61.4% of the EPX rewards for the past week and similarly for the remaining pools.
Finally, when there is a proposal to create a new pool, VlEPX owners can vote to decide if that pool is accepted and Ellipsis allocates the EPX bonus to it.
So with the above model, what are the benefits and problems of VlEPX?
The benefits and problems of VlEPX
Because Ellipsis references and applies the veToken model of the Curve platform to its EPX token, vlEPX shares the advantages and disadvantages of veCRV. As follows:
Advantages
Both the project and the holder benefit.
The first advantage is that vlEPX benefits both Ellipsis and the user.
Specifically, you can see that VlEPX holders enjoy significantly greater profits than just providing liquidity and, at the same time, are more involved in the project governance model.
While Ellipsis also benefits when encouraging users to hold tokens, thereby partly solving the problem of balancing the reward mechanism and token inflation,
Besides, thanks to the EPX locking mechanism, which has many different benefits, Ellipsis will have more users who stick with the project for a long time.
Encourage users to take part in DAO
Often, DAOs face the problem of a lack of user participation in voting or in governance activities.
Ellipsis has partly solved this problem because, thanks to vlEPX, the project is likely to have more long-term loyal customers and thereby have more quality votes.
Besides, the longer a user holds on to VlEPX, the more votes they have. These have encouraged them to participate more in voting as well as in the governance of the project.
Defect
vlEPX has low liquidity
One of the common disadvantages of VLEPX and vCRV is that there is almost no liquidity.
Because vlEPX is difficult to trade, once a user locks EPX to get vlEPX, it also means that the token will be locked and cannot be circulated, resulting in low capital efficiency.
This means that Ellipsis may have to depend on third parties to provide liquidity for its VLEPX.
An example of this is what Dot Dot Finance is doing with Ellipsis.
Create a war for control
Similar to veCRV, another major drawback is that vlEPX indirectly creates a battle for control by holding the majority of vlEPX. This goes against crypto’s decentralization and fairness for all.
Once upon a time on the Curve platform, there was a liquidity war, aka “Curve Wars.” Will Ellipsis Wars occur because Ellipsis has a close relationship with Curve and vlEPX has a model similar to veCRV?
In my opinion, there won’t be this fight in the near future because Ellipsis’ TVL is simply much lower than Curve’s.
Specifically, while Curve is a platform with a TVL of 8.69 billion USD, leading the Ethereum system, Ellipsis’ TVL is around 200 million USD.
Because TVL is so low, the reward for the winner won’t be very lucrative. Therefore, ellipsis wars will not take place in the near future.
Why is Ellipsis “migrating” from EPS to EPX?
So why did the project “migrate” from the old token, EPS, to EPX?
In my opinion, the main reason is that, initially, Ellipsis was just a fork of Curve Finance to provide services and attract liquidity in the BNB system.
Besides, veCRV holders will be rewarded in the form of EPS tokens for one year.
Until March 17, which marks the last date that users can receive EPS rewards from veCRV, it can be said that the close connection between Ellipsis and Curve has decreased somewhat.
At the same time, after this date, the project must also find ways to attract more users and optimize use cases for its token. So Ellipsis upgraded to 2.0 as a more independent version of Curve.
The project also applies Curve’s successful veToken model to EPX to increase the use case for this token, improve the governance model, and attract more users.
EPX’s Influence on EPS Price
Since the project announced its plan to create a new token, EPX, on March 14, the price of EPS has increased by nearly x2 from $0.15 to a peak of $0.29 a month later.
In my opinion, the first reason is that the “migration” from EPX tokens to EPS will cause the supply of EPS to decrease more and more.
This creates the basis for the “whales” to be more easily manipulated to create price pumps.
Since then, it is possible that many speculators have seen this idea and have bought into EPS.
In addition, owning an EPX coin brings more use cases as well as earns a greater profit than the old EPS coin, so many people also buy EPS early to be able to switch to the EPX token in the future.
What will happen to the EPX price in the short term?
Since the EPS to EPX conversion is still going on, the supply of this token is not too much, as well as the fact that EPX has only recently been listed on major exchanges, so this may be a premise for the pump dump of the EPX token in the future. short-term
In the long run, it is necessary to consider whether this change will really attract more users as well as new liquidity.
If the project’s TVL can grow sustainably in the future, this could be a good sign for EPX in the long term.
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