LUNA & UST Post-Mortem: Analysis of the Top 100 Cryptos (as of May 16, 2022) — #100 — Symbol ‘XYM’


DISCLAIMER: This is an opinion piece, and I will disclose whether or not I personally own any of these coins as this analysis goes on over the weeks ahead, and none of this is financial advice. My verbiage and wording may not be technically correct regarding the technology of these blockchains/tokens, so reading between the lines may be a necessity for some of this stuff, and as always DYOR.

The Setup*
This journey involves the top 100 cryptos according to CoinMarketCap as of May 16, 2022. We are bound to have some cryptos leave and join the top 100 before I am finished with my analysis. You can find links to the other analyses at the end of this article. Since this is #100, there are no other analyses.

The fallout of LUNA and the UST stablecoin was not pretty for the entire crypto market during May of 2022. Algorithmic stablecoins have flaws, and I personally did not even know that UST was algorithmic. This has been a huge lesson learned for a lot of people about how we ALL need to DYOR (Do Your Own Research). This series of *very* short articles is my unprofessional analysis/opinion of the top 100 cryptos to see if anything flawed can be uncovered, and whether or not I believe they will last in the long run.

#100: Symbol ‘XYM’ (writer does not have any vested interest in XYM)
Symbol, with the native currency XYM, is a Proof of Stake (PoS) network that allows users to build tokens and implement smart contracts on its platform. It uses “PoS+” which has a type of weighted system on who receives block rewards. It is not solely based on the node’s staking amount; it includes things such as transaction volume and transaction size. The more you transact, the more of a chance you’ll earn the block reward (which happens multiple times per minute on average). The PoS+ system is supposed to prevent only the wealthiest stakers and node runners from accruing all of the block rewards. The developers behind XYM recognized this issue with other PoS chains and created an incentive system to be active in order to increase their “importance” and a chance to earn block rewards.

Symbol incentivizes node runners to be the most active on the chain to earn block rewards, but this is not viable for the long term. It’s just like “play-to-earn”. The more you “play”, aka participate, on chain through transactions the more of a chance you get rewarded.

I like to test things that feel like they’re play-to-earn with this test:

If you gave your P2E gamers $1,000,000… would they keep playing?

If the answer is yes, you’ve succeeded in building a community, ecosystem, and an actual entertaining game.

If the answer is no, you’ve created a job.

XYM feels like a job. There is no way that sending (most likely) meaningless transactions on-chain is fun. This will lead to the mechanics of the PoS+ system to dwindle. There are 2 end-game scenarios with XYM.

1) Only a few people keep up with constantly sending transactions on the Symbol chain, and they’re the ones accruing block rewards constantly. This will lead to a massive wealth difference.

2) No one keeps up with constantly sending transactions, and the only thing of “importance” for earning block rewards ends up being the amount of XYM staked, and now we are back to square 1 PoS.

The project seems pretty much decentralized because anyone can run a node, besides the initial coin distribution of it which came from an airdrop based on people’s holdings of $XEM (aka NEM). It’s extremely hard to find info on how much XYM was airdropped. I believe it was in the billions based on its initial supply — usually this leads to a selloff, especially when the first trading price was around $0.50 for XYM. Billions of free tokens lead to selling, because it’s free. Symbol is not a project I would touch personally and I expect the ratio of XYM:BTC to find its way to 1 sat (aka 1/100,000,000 of a Bitcoin) in the future.

But hey, that is still performing better than LUNA which is 0.5 sats at the time of this article.