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Wu Shuo Author | Wu Zhuocheng
Editor of this issue | Colin Wu
Editor of this issue | Colin Wu
On the 19th, MDEX caused a storm, mainly because investors who entered the market at a high point were angry because of losses. It was early rumored that MDEX was founded by Huang Han (unconfirmed), but the turmoil on the 19th also revealed that Liu Jingchao, the founder of the original Bijiu, and FBG Zhou Shuoji were investors. As for whether Huobi and Du have invested in it, it is currently unknown. The outside world prefers that Huobi has no control, otherwise it will not turn to BSC later.
In all fairness, the price of MDX is indeed unsatisfactory, falling 76% in the past 6 months and 3% in the past 30 days. In contrast, CAKE has risen by 18% in the past 6 months and 84% in the past 30 days; UNI has risen by 38% in the past 6 months and 80% in the past 3 months; SUSHI has fallen by 4% in the past 6 months and has risen by 84% in the past 30 days. up 114%. This shows that in the three months after the big fluctuation after 519, DEX TOKEN has basically returned to the level of 519, but MDEX still has a 76% decline, which is the core reason why investors complain.
Why is the price of MDEX depressed?
The first reason: the total lock-up volume continues to decline.
At present, the total amount of MDEX in HECO and BSC is 1.86 billion US dollars, and the transaction volume is 740 million US dollars. Compared with the data on March 17, the TVL was US$2.28 billion, and the daily trading volume was US$2.2 billion; and the data on April 12, the TVL was US$4.77 billion, and the daily trading volume was US$2.24 billion, both of which have shrunk significantly.
Although the total locked-up volume of DeFi has shrunk significantly after 519, the decline in MDEX has far exceeded that of other mainstream DEXs. Especially since July, the TVL of most mainstream DEXs has risen sharply. As of 8.20, the total locked-up volume has approached the previous high 150 billion, but MDEX did not rebound.
Among them, the previous high of UNI was 9.33 billion, and it is currently 5.11 billion; the previous high of SUSHI was 5.42 billion, and it is currently 4.52 billion; the previous high of PANCKE was 7.8 billion, and it is currently 5.83 billion. Except for UNI, the TVL of other mainstream DEXs has recovered to more than 75% of the highest point. Considering the prosperity of the UNI ecology, there are many altcoins among them, it is understandable that the bubble burst during the bear market led to a sharp decline in TVL.
DeFi projects do not have a high threshold in terms of professionalism, and the most critical data is TVL. If the TVL goes down, then the depth goes down, the transaction volume goes down, and then the fees go down. The mdex mining method is a combination of liquidity mining and transaction mining, so commission rebates are an important source of income for miners. This decline in income will lead to miners fleeing, so TVL will further decline, further resulting in a decline in transaction volume and Fees fell, and eventually entered a vicious circle, and the currency price fell again and again.
The second reason: the inability to reduce the inflation rate. Each Heco chain block produces 80 MDX rewards, which are halved every six months. Theoretically, the third halving will be completed in the second half of 2022, and the subsequent growth rate will be very slow. Similar to Bitcoin, the additional issuance will stabilize after the third halving. Therefore, although the MDX plan is to issue a total of 1 billion pieces, But in fact the upper limit in the short term is about 700 million.
Compared with other DEXs, MDEX has the most serious increase in mining and selling. SBF, the founder of the giant whale FTX, also entered mining with a huge amount of money, which is also determined by the MDEX model.
After the halving on June 5th, the MDX generated by each block should be reduced by 40, but after the cross-chain is realized, each block of the BSC chain can also generate 40 MDX, so the halving effect cannot be reflected. Perhaps it is precisely because of this consideration that MDEX decided to halve the second time in advance, which will start around the beginning of September. However, starting the halving at will also makes more people criticize MDEX for not being decentralized enough.
The number of holding addresses is 240,675, and the growth rate of the number of new users is about 20%. Although there is a steady increase, there is a gap compared with SUSHI and PANCAKE with the same lock-up level. Addresses with more than 1 million positions accounted for 97% of the total. With this position ratio, it is actually very easy for large investors to pull the market. There is no movement yet, and it may need to wait until it is halved again before taking any action.
The third reason: ecology and consensus. It is undeniable that although cross-chain to BSC, the core of MDEX is still the HECO ecology. Under the circumstances of OEC's traffic sharing and Huobi's self-restriction, HECO's natural situation is not good. Compared with the Ethereum ecology represented by UNI and SUSHI and the BSC ecology of PANCAKE (PANCAKE is built by Binance, so it cannot compete with BSC), MDEX and HECO have insufficient real needs and user range, and are too concentrated in the Chinese world , the ecology is at a disadvantage.
Regarding the controversial handling fee issue, UNI’s incentive model has a handling fee dividend, that is, a 0.3% transaction handling fee (ETH settlement), and these handling fees will be fully allocated to liquidity providers. SUSHI has made some modifications, and its transaction fee is also 0.3%, but this part of the fee is split into two incentives, of which 0.25% is directly allocated to liquidity providers, and the remaining 0.05% is converted into SUSHI and distributed to SUSHI pledgers. This means that SushiSwap will use part of the fee income to buy back SUSHI, which provides SUSHI with purchasing power.
MDEX also has commission dividends, the transaction fee is also 0.3%, 0.14% is used to reward mining users, and 0.06% is used to repurchase and destroy MDX, which provides buying support similar to SUSHI. However, another 0.1% is claimed to be used to promote the development of ecological projects, which cannot be directly withdrawn from the economic model. The community claims that the MDEX development team has a daily net income of more than 10 million US dollars. This may be an exaggeration, but if 0.1% of the handling fee is all attributed to the team’s income, then at the peak of the daily transaction volume of the chain exceeding 2 billion US dollars, the team’s daily The daily income is at least 2 million US dollars (the highest is more than 5 billion US dollars, and the income is more than 5 million US dollars).
Summary: As we pointed out earlier in our April article:
"The economic model of MDEX has a strong 'positive feedback' effect. In the initial stage of project development, MDEX is supported by the HECO ecology, and the price of MDX rises, which leads to an increase in the income of liquidity mining, attracting a large number of LPs to provide liquidity, trading The mining mechanism also attracts arbitrageurs to participate in the transaction, and the high TVL and high fee reserves further increase the price.
However, as the number of Tokens in circulation continues to increase, the proportion of transaction mining fees allocated to units is getting lower and lower, which will lead to a gradual decline in the price of MDX, which in turn will trigger TVL and transaction mining transactions The decline in volume leads to a further decline in the price of MDX.
In addition, in the current (April) economic model, MDEX’s handling fee is 100% feeding back to the ecology. MDEX can actively select high-quality project parties to provide liquidity incentives for its tokens, but in the long run, this handling fee will There may be problems with the distribution method.
First, for LPs, it is impossible to obtain handling fees for providing liquidity, especially for LPs that provide liquidity for the new project No. Leading to a decline in the enthusiasm of LPs to provide liquidity. The second is that the number of MDX issued will continue to decline over time, and the incentives from MDX tokens will decline. If LPs want to continue to provide liquidity on it, they may eventually have to rely on handling fees. It is speculated that MDEX may gradually modify the procedures in the later stage How the fee is allocated.
Judging from the experience of liquidity mining such as FCoin, if the ecological construction cannot be completed, then the early liquidity mining will have 'drug resistance' or even toxicity. "
From this point of view, the price of MDX has a certain law that it will inevitably fall, and those who blindly accept orders or "fudge accept orders" do lack basic judgments (or have bad intentions).
