Crypto Analytics #2: WOOFY - The First Useful Dog Token?

Crypto Analytics #2: WOOFY - The First Useful Dog Token?

The one where I take a meme too seriously.

See Crypto Analytics #1: Exploring Uniswap v3 Data here

As part of this analysis, I contributed to Issue #72 of the ‘Our Network’ newsletter. Check it out here!

On May 11, 2021, Yearn Finance, the largest crypto yield aggregator (automated deposit, withdrawal, reinvestment strategies) introduced the WOOFY token, which tested two ideas:

  1. Unit Price Psychology: Yearn’s YFI governance token was one of the higher-priced per unit assets (~$75k for 1 YFI on May 11), but YFI holders could exchange YFI for WOOFY at a 1:1M rate (i.e. if 1 YFI is $75k, then 1 WOOFY is $0.075). Naturally, this process is called "woof" and "unwoof."
  2. Dog Meme Coins.

YFI ran up to an all-time high of $90k a few hours after WOOFY launched, which led to my questions: Is this real? Is this a meme? Is this an innovation in growth marketing?

It’s time for dashboard #2, follow along here:

Note: I hold YFI.

Who is holding this dog token?

This was my first question. WOOFY holders (addresses) already made up 9% (3.2k) of all addresses with Yearn exposure (YFI or WOOFY) even though WOOFY only makes up 0.7% of Yearn’s market cap. So, is this the Yearn community having fun, or a new set of people that see a dog token and buy it?

The answer: A little bit of both. 84% (2.7k) of WOOFY holders have never ever held YFI. But, the other 15% of WOOFY holders who have previously held YFI made up 59% of the total USD Value of WOOFY. So while YFI holders control most of WOOFY's value, this larger WOOFY-only group either decided that they finally wanted to buy into Yearn’s ecosystem via a smaller unit price… or they wanted a dog meme.

WOOFY Holders — Segmented by those who previously held YFI (gray) and those who never have (purple)

But, what seems like a meme on the surface could actually be an opportunity for Yearn. They brought in 2.7k new holders essentially overnight (1/10 of their holder base), and that’s just on the Ethereum network. So far, only 17 WOOFY-first holders have converted to also hold YFI in the same wallet. But maybe that’s the opportunity: If WOOFY can somehow funnel new holders and community members into the Yearn ecosystem, what can Yearn gain from that?

How are they finding WOOFY?

Among the holders who either only held WOOFY, or who held it before YFI, about 75% got WOOFY from Uniswap (mostly from v3), and another 15% used SushiSwap.

After an initial spike of buys, most of WOOFY’s trading volume has been from selling, with about 96% of total trading volume done with ETH.

How does WOOFY Influence YFI?

Users can swap 1 YFI for 1M WOOFY and visa-versa, so while there’s nothing forcing WOOFY to hold a certain price, arbitragers can swap in and out of YFI and WOOFY for a premium which helps rebalance the price.

Leading up to YFI’s all-time high, WOOFY ranged between 10–40% of total Yearn trading, peaking at $7.4M hourly volume. But aside from launch and market volatility, YFI and WOOFY’s derived price (WOOFY price * 1M) has so far held within +/- 5% of YFI’s unit price.

WOOFY Premium = WOOFY’s Derived Price Difference versus YFI

Across Decentralized Exchanges (DEXs), there are some small spikes where one exchange trades WOOFY much higher than other exchanges. But eyeballing the chart, the prices seem to be fairly in-line with each other. Still, DEX price mismatches are another point of arbitrage that could make it back to YFI.

How is WOOFY Being Used?

About 20% ($2.9M) of WOOFY’s total supply is locked in a Smart Contract. About 50% of that is locked in liquidity pools in DEXs (Uniswap and Sushiswap). But, 48% is locked in the Anyswap bridge. I know next to nothing about Anyswap. But as I understand it, this means that WOOFY is able to expand to other networks, such as Binance Smart Chain (BSC), where meme coins thrive.

I’ve made it this far without making any dog puns, which is a miracle.

I’ve been so back and forth on if WOOFY is something worth monitoring, or if it’s just a fun and innocent thing because dogs go woof. But it's the only meme (that I know of), which is tied to an actual leading DeFi protocol's asset. WOOFY tokens have the rights to underlying YFI. There has to be value for Yearn in growing their ecosystem of participating users, but are those the token holders that you want? How do you stay true to your vision and purpose while also running a meme coin on the side? This could be a complete non-issue, or it could challenge Yearn's identity. We'll see how it plays out in the dog days of summer.

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Michael Silberling @MSilb7
Michael Silberling
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