Data Sourcing & Analysis
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Data Sourcing & Analysis

One of the attractive aspects of evaluating crypto assets built on a public blockchain, when compared to TradFi equities, is the ability to access and analyze an infinite treasure trove of real-time data. Rather than deal with quarterly wait times and a menu of 'audited' metrics hand-picked by corporate management, DeFi investors can verify exactly how well the protocols their assets govern are performing. This is difficult for individuals working alone, due to the cost of the data feeds and the technical difficulties in analysing and rendering actionable data visually. Sharing the cost and effort across the entire xCVP DAO is the best way to access and consume this river of data.

The PowerPool DAO Forum 'dashboards' are intended to be a place where compelling proposals can be analysed with meaningful data, acted upon and rewards paid. Data feeds from all sources are the essence of informed management of token shortlists and re-weightings. Relatively sophisticated xCVP stakers (the ‘Illuminati’) are looking for data-driven analysis of fundamental metrics structured around shortlisting and re-weighting discussions for vehicles they can invest in responsibly, not via random shills and memes on social media.

Sadly, data is not information. This is one of the main reasons that PowerPool's continuously-revised, information-rich, DAO-sentiment weighted active management of the Power Universe shortlists and weightings can add value compared to mechanistic 'indexes' and algorithmic managers. In crypto, to a much greater extent than in regulated, audited TradFi, a few easily-calculated and widely-published calculations like market cap and TVL are very often mis-leading and easily-gamed.

Market Cap - Did you know that the market cap of Ethereum Classic (ETC) is currently about $5.0 billion? ETC is an early fork of Ethereum (post DAO hack) that is staying on POW and not being developed or used to any significant extent. For anyone other than the DAO hackers, there is no conceivable 'bull' case for Ethereum Classic. So why is the Market Cap about $5.0 billion? Because this market cap calculation alone tells you very little about the potential value of a token, protocol or chain. Two legacy ETC nodes (run by the original DAO hackers?) 'wash trading' between themselves will set a price that is multiplied by millions of outstanding (hacked) tokens (not being used for anything and hey presto! simplistic arithmetic will give you this kind of market cap. This is one reason why mechanistic, 'Top 10 by Market Cap' weighted 'index' tokens are not reliable guides for pooled investment, or really any kind of investment. Robinhood recently listed ETC, in part because the token is old enough not to be considered a security, and partly because the people in Robinhood know almost nothing about crypto, and the $5.0 billion market cap of ETC looked attractive. The Robinhood user base who inevitably further ran up the price of ETC, some maybe confusing it with ETH on their mobile phones, will eventually all suffer greatly as a result. Another recent example of how misleading market cap calculations can be is Dfinity's Internet Computer (ICP), dropping over 80%, not due to any change in the outlook for the project, but because a suddenly-vested massive overhang of founder/VC shares were dumped on the market. This can happen to many protocols, and illustrates another reason why market cap is very transitory as a sole metric in crypto.

Temporary (incentivised) Value Locked - The total value locked (TVL) metric is a favorite of the crypto space because it’s a really easy metric to point to in order to paint a narrative around growth. Early on it was a decent measure of a DeFi protocol’s growth (before liquidity mining) but now it has become a target metric for projects which means that it ceases to be a good measure. There are a number of reasons as to why the TVL metric is now deeply flawed - some of them include: the metric is easy to game, it’s commonly inflated via liquidity incentives, not all TVL is created equal and now that it’s being used as a target, people have a strong incentive to inflate the numbers in any way that they can.

TVL is mostly flawed because of liquidity mining incentives - there have been countless examples of protocols that have gotten hundreds of millions (if not billions) of TVL within a short period of time only to lose it all once the incentives run out. This is simply because most people don’t actually want to use the product or service that the project is offering - they just want to farm and sell off the tokens for a profit. You’ll notice that the best and longest lasting projects in this space either have no current liquidity incentives (Maker, Uniswap and Yearn) or modest incentives that have only been put in place after the product was already widely used (Aave, Curve and Compound).

APY...

There’s really no silver bullet metric that we can look at to measure the “real” usage of various DeFi protocols or even layer 1 blockchains themselves and it’s only going to get harder to measure this activity as time goes on (especially when it comes to layer 2 which I’ve covered previously here). Even metrics like layer 1 blockchain fee revenue can be gamed and inflated depending on the layer 1 that you’re looking at. I guess a collection of different metrics such as TVL, fee revenue, active users, number of integrations and others is probably the way forward from here though I am looking forward to what else the DAO can come up with!

PowerPool will need the technical and data architecture to continuously add value to raw data sourced internally/on-chain/via oracles using an evolving version of PowerAgent, and supplemented/cross-referenced externally via purchased feeds. PowerAgent is an autonomous agent that can retrieve data for PowerPool protocol needs and make specific contract calls. It was developed to source data feeds from DEXes like Uniswap and Sushiswap as TWAPs (time weighted average prices), calling other contracts based on a schedule and automating weight changing.

Led by members of the SparkData team, broad DAO discussions of data sourcing and options available will very quickly get everyone on the same page as to what is best, what is feasible and what we could source/develop and track).

DAO-Originated Fundamentals Tracking Dashboards

Attracting 'Illuminati' including institutional investors to stake at least xCVP 1,000, while informing them in order to improve their voting will require leading edge data & analytics to draw traffic to the Wiki & Forum. Solana-based competitor Symmetry is already building tracking dashboards:

Periodic Sentiment Input to Guide Re-weightings

PowerPool will be attempting to harness input generated by the members of the DAO itself to influence the active management of investment pools and weightings. This idea is already being used in managing hedge funds stock portfolios by Numeraire/NMR. There are many prediction markets already launched in the crypto space, and PowerPool will attempt to attract a sophisticated community of crypto-savvy xCVP stakers to guide the continuous flash polling sentiment periodic re-re-weighting process actively managing the Power Universe family of broadly-diversified, publically-accessible pooled investment vehicles.