Financial Analysis of $TNKR
In the next week, Tinkernet is having its token launch via a Liquidity Bootstrapping Pool hosted on Basilisk. The token launch is highly anticipated after the community-focused crowdloan InvArch’s Tinkernet had. Since finishing the crowdloan, InvArch’s Tinkernet is shaping up to be at the forefront of innovation in the Polkadot and Kusama ecosystem. This momentum is not surprising when you look at who the leaders of InvArch are. Dakota Barnett and Gabriel Facco de Arruda seem to be relentlessly bringing progress and cutting-edge technology to the ecosphere while being active members of the Polkadot and Kusama communities.
While Parachain launches on centralized or decentralized exchanges in the past bull market have oftentimes been a major bot-ridden disappointment, Tinkernet has its token launch in a much different circumstance. The fair price discovery a LBP brings with it in a bear market, can shape up to be a good way to find reasonable evaluation for a token. The following price action will then be shaped by how the protocol is leveraging its technology.
A Look into the Protocol
Tinkernet is InvArch’s canary network in the original meaning of what Kusama is to Polkadot. A fast-paced sometimes chaotic people’s version of its VC-oriented chain. Tinkernet aims for a “first to market” – approach.
Tinkernet’s technology portfolio is tightly packed with innovations like:
- the DAOist CDK, which will revolutionize the control of DAOs and elevate it to its original meaning;
- the INV4-GIT which is a censor-free Web3 developer destination for Git file management and version control;
- the XC-Authentication kit, which will be on the forefront of authenticating assets cross chain;
- the INV4 Protocol, which features IP Sets, IP files, IP Licenses, and IP Tokens, which is a revolutionary new way to think about intellectual property and startup funding in a trustless Web3 way;
- and the INV4 NFT primitives which will serve as a framework, layer 2 applications can build onto.
What is the Snek LBP on Basilisk:
Snek LBP allows crypto projects to launch AMM pools for bootstrapping liquidity which are limited in time (typically 3-5 days). A defining feature of LBPs is the mechanism of time-dependent weights which continuously exerts a downward pressure on the price. If no orders are placed, the price will fall with every block. Buy orders push the price back up in accordance with the size of the order.
The shifting weights mechanism of Snek LBP has several important implications. Firstly, it offers a capital-efficient way for projects to bootstrap liquidity. There is no need to provide 50:50 liquidity to kickstart an LBP (which is the case for XYK) - the weights mechanism allows projects to offer as little as 1% of the asset used to bootstrap liquidity. Furthermore, our fee repay mechanism - a unique Basilisk feature, helps the project quickly repay the costs associated with organizing an LBP by placing an additional fee on top of early trades.
Running an LBP is not only capital-efficient but also a fair way to navigate price discovery, distribute tokens and grow your community. Since buy orders push the price up, front-running by bots which snipe large amounts of the available supply is no longer viable. Actors willing to acquire bigger amounts of tokens would need to split their orders over time to achieve a reasonable price. This interaction between programmatic sell pressure and buy orders makes Snek LBP an excellent tool for achieving fair price discovery and a wider distribution of tokens across the community.
Source: Basilisk Substack
As all markets did a downturn in the last months, the crypto market seems to have stabilized in the last weeks. Additionally, there are hints of decoupling from traditional markets, which could give relief to a lot of crypto investors. The last cycles showed that investing into projects which show strong signs of building in the bear market, can pay out greatly when the bull market arrives.
InvArch and in that regard Tinkernet is one of these bear market winners launching innovative and successful projects like the YoudleDAO, which has an incredible bear market volume of over 2200 KSM on Singular.
But technology and progress are not everything one should look for in a project. Tokenomics and the token use case play a vital role in the evaluation of the question “to ape or not to ape?”.
The tokenomics of $TNKR consists of the following categories:
Comparing the token allocations to other Parachains gives great results for the Tinkernet protocol, as shown in the table below. It scores a fantastic 97,86 on the opportunity scale, which it achieves through the big allocation to treasury and crowdloan. With a score of 45,79 on the risk rating, Tinkernet scores one of the lowest risk ratings of all projects.
As you can see Tinkernet sits nicely in the lower right corner which equals a low risk rating while having a high opportunity rating. It is close to crowd favorites like Moonriver and Basilisk. But this comes with no surprise when looking at the tokenomics.
Tinkernet allocates 55% of its tokens to subcategories that fall under the main category of Treasury. These tokens will get used to help solidify the ambitious goals of the project through different channels. My two personal favorite categories are OCIF-SIPA staking at 10% of all tokens, which utilizes the revolutionizing new mechanism of IP staking & farming Tinkernet will introduce, and VCs with a 5% allocation. This is just a placeholder though, and no VCs are in Tinkernet. You read that right, no VCs are to be found in the Tinkernet tokenomics. If the 5% allocation will not get sold to VCS it will get added to the treasury, further boosting the tokenomics.
Besides having favorable tokenomics, the token must have solid use cases to create pull factors for new users to enter the protocol. The $TNKR token has multiple use cases.
The first use case of the $TNKR token is for the payment of transaction(tx) fees. $TNKR will create, via hosting, other projects with their NFT primitive infrastructure as an L1. As Ethereum is the enabling L1-chain for a multitude of different L2-chains, Tinkernet will provide their toolkit primitives and infrastructure to pave the way for easy L2 adoption onto their framework. This could bring substantial price appreciation and use of $TNKR to support and ensure the smooth progress of hosted L2s in the medium to long term.
The other core pillar of $TNKR is the use in IP staking, IP farming, and IP donations. This is where it gets really interesting. These new mechanisms add a whole new layer to the well-known process of yield farming. Investors supporting and earning from their favorite IP will be a huge TVL draw for the Tinkernet protocol. I want to emphasize this once more. This combination of philanthropy and getting yield on investments is the perfect mix for investors to pull their liquidity from elsewhere and enter an IP staking deal. Instead of doing bland yield farming in a liquidity pool with the risk of impermanent loss, investors can support their favorite project/idea getting them their needed financing while earning real yield with it. This industry disrupting technology will be an adequate opponent to “traditional” staking options on the market.
Later on, IP farming will get introduced as well. With IP farming investors can earn IP tokens from the projects they stake their tokens for and who receive funding in exchange for that. This mechanism introduces a high-risk, very high reward opportunity for more risk tolerant people.
Additionally to L2 tx fees, tx fees will also be needed to use XCA to authenticate assets cross-chain. $TNKR tokens will be needed to participate in the governance process as well.
The last use case is the use of $TNKR as a currency for DAO treasuries who use the DaoistCDK. When adoption of the DaoistCDK becomes widespread as the new gold standard for DAOs to elevate them from mere Discord servers to the proper DAOs they always wanted to be, this will become a big pull factor for new liquidity entering the protocol.
Other use cases, such as collateral for stablecoins or payment tokens for storage options, could possibly be added in the future.
The LBP will be a good opportunity to get an early allocation of $TNKR in your wallet. These tokens can immediately be put to use with the IP staking Tinkernet has planned. Investors can expect a very high 3-digit APR in the first weeks until the APR normalizes to sustainable levels when token unlocks and general widespread distribution create a larger pool of available tokens. At this point, IP staking will still play an important role in the Tinkernet ecosystem, but tx fees, stemming from general adoption and L2s built on Tinkernet’s infrastructure, will be a second pillar on which users can get yield from.
Buying into a project during the bear market is shaping up to be a different experience compared to the dump fest most Parachain token launches were during the bull market. Tokens launched in a bear market will more likely undergo fair price discovery. Investors have the chance to enter the protocol at a relatively low evaluation and stick with it through its adoption and growth to the broader market without the sell pressure over inflated bull market releases bring with them. This endurance can be heavily rewarded when the new bull market arrives.
The ambition the InvArch team shows, with their industry interrupting new technologies, should not be underestimated. With the introduction of YoudleDAO, InvArch showed that it is able to produce a great amount of hype for their products in a very brief time, during a bear market.
Read more about InvArchs OCIF
Tinkernet and its main protocol InvArch have been hot contenders for crowd and developer favorites in the last months. Even Polkadot heavyweights like Gavin Wood himself and co-founder Rob Habermeier have taken notice of the protocol founder Duo Dakota Barnett and Gabriel Facco de Arruda. The duo is extremely active in the ecosystem and keep delivering their technologies on a tight schedule. Gabriel, who just recently got voted into the Polkadot Fellowship, even contributed a substantial part on realizing the GMorDie chain and their first KICRA proposal.
Tinkernet seems to follow the approach to reward participants in their chain generously to turn mercenaries into evangelists. In the case of Moonriver this strategy turned out to be a heavy success story, which created entire echo chambers of Movr evangelists. We will see if this approach will work out in the long term for Tinkernet.
From a technical and a financial perspective, there are basically only good things to say about Tinkernet. Disrupting and cutting-edge technology combined with very promising tokenomics and an active community-engaging founder team is one of the most favorable combinations one could hope for a project to invest into in the bear market. This opportunity could shape up to be a very golden ticket in the next bull market.