In 2021 I tried out different DeFi projects with the hopes of making some extra passive income from cryptocurrency. I’ve tried BlockFi, Anchor Protocol and PancakeSwap so far, and have only kept the first two investments as of today.
But aside from those three, I’ve made an investment into Wonderland, a decentralized reserve currency protocol available on the Avalanche Network, back in November.
I’m actually quite late to the party here because a lot has happened, from what I’ve read and seen, to Wonderland after the 3 months I’ve left my investment.
We’re going to discuss what happened to the Wonderland project, and what happened to my investment after 3 months.
What is Wonderland?
Wonderland is a decentralized finance (DeFi) platform on the Avalanche blockchain. It was launched in September 2021, and founded by Daniele Sestagalli.
It is a fork of OlympusDAO (OHM), which basically means that they used OHM’s framework to create the project. They’re major similarity is that both use a reserve to back each TIME token. The difference, however, is that OHM uses the DAI token to back up its coin, whereas TIME uses MIM.
Users can stake TIME tokens to earn more TIME, or Mint TIME at a discounted rate by trading it for LP tokens or other assets. However, each new TIME token that is minted lowers the overall value of each token.
The developers of TIME expect the value of the token to go down over time. While the price will most likely go down, the treasury is used to back each token and ensure that the price will not go below a certain point.
What Happened to Wonderland?
A lot of investors made a killing with Wonderland using their features, citing that they would make more than 1,000+% APY to as high as 80,000+% APY. But towards the end of January 2022, Wonderland’s TVL or total locked value went from $2.6B to around $900M.
So what happened?
The entire crypto market saw a downward trend during the last half of November 2021. While this is a typical scenario for the crypto market, OlympusDAO and its forks had a hard time. According to This Morning On Chain,
Investors in these projects expected massive gains — often using leverage to achieve their desired returns. As the market trended sideways and down, leveraged positions were liquidated and investors lost confidence in high-APY DAOs.
Since the end of November, TIME’s token price went down in value and its leadership encourage investors to stay on the project. The anonymous “Sifu” implied that they were going to invest in other revenue-generating projects. As the project lost investors, it made promises to airdrop tokens and initiate buybacks to prevent the token from flash crashing. No airdrop were made and buybacks were initiated when the price inched towards $1,000. But within a week, a massive selloff dropped TIME to less than $400.
There are speculations that Wonderland leadership let the token tank, liquidating leveraged positions in the process. But a day later that, news broke that a famed exit scammer, Michael Patryn, may be Sifu, Wonderland’s CFO and treasury manager.
On January 27, Twitter user @zachxbt revealed Sifu’s identity and shared a chat with Daniele Sestagalli confirming Sifu’s identity as Michael Patryn. Previously, Patryn served prison time in the US for identity fraud but is suspected of stealing over $150M in an exit scam at Canadian centralized exchange QuadrigaCX in 2019.
On January 29, TIME token holders took a vote on whether to shut down the projects and distribute its treasury, or to continue the project. Most wanted to continue Wonderland, but despite that, a day later, Sestagalli kills the Wonderland project anyway.
Sestagalli resurfaced a few days later for an AMA talking about Wonderland’s future. He mentions not ending the project, a restructuring of its leadership, new tokenomics and possibly reimbursing some of the Wonderland investors who were liquidated.
Finally, Sestagalli teased two potential new directions for the project, “Wonderland 2.0,” and the “Professor Proposal.” There are no updates regarding these at the moment.
My Results in Wonderland After 3 Months
As for my investment, you can guess what the results were after three months. When I looked at their page to try and get my investment, luckily I could still see my balance
When I first started, I had invested $383 into TIME. Plus, I paid around $2.33 in fees. At this time, I was really happy that fees weren’t much of a problem in the Avalanche network. I thought that this would help since it wouldn’t eat much into my initial investment.
3 months later, since I was late to the news and late in doing my exit, my $383 investment has gone down to $18.50 — a 95.17% decrease in value.
It’s a very tragic loss to be honest since I had high hopes that the project would survive long term. Going through this again made me think about the time I lost around $3,000 to BitConnect in 2017. It was a devastating loss because I was a college student at that time, and had barely anything to help me get back up.
The difference this time, however, is that I was prepared to lose the money I invested in Wonderland. I feel quite detached to the money I lost here since I had assumptions that I would lose it entirely in this project. After all, this was a project with high APYs believing in itself that it would be sustainable in the long term.
But I cannot stress enough the fact that I lost money, and that these types of project are high risk. Losing money is part of the game.
Final Thoughts & Lessons
There are a couple of things that this experience has taught me. Let me share them with you so you’re a little bit wiser today and more practical when it comes to these DeFi projects.
- Don’t Rush — it took me a while to decide to invest in Wonderland. That’s something I got right. I’ve seen the project in October and saw that people were getting these crazy APYs, and that got my interest. After looking into the project, I decided to only invest the amount that I used because it was relatively big enough compared to the usual amount I use for these experiments, but small enough that it wouldn’t have a big impact on my finances.
- Keep Your Radar On — this was one thing that I completely disregarded jumping into Wonderland. These projects are not regulated by any entity that would help you get your investment back. These are governed by the people, or the DAO. And they’re the main connection you have to the project, or to your money. It is important that you keep your eye on the social metrics for each project such as community chatter and hype around it. Follow their social media channels to get updated on what’s happening, and get into their private community groups so you have an insight on what may happen that is not being publicized.
- Research More — this is by far the most important aspect in investing. I try my best to do this, but it’s unavoidable that I’m able to do it perfectly.
- Tokenomics — this is basically the economics of a token and talks about how it will be used inside the project. Tokenomics covers three aspects of a digital asset: fundraising, governance and ownership.
- Development Team — one issue with a lot of DeFi projects is that they are usually founded by people who are anonymous. The anonymity in cryptocurrency is one of the factors that make the space attractive, but it’s also a double-edged sword. Knowing who the development team is, their experience and credibility will be a couple of things I’m improving on my due diligence.
My Plan for 2022
My plan for 2022 is simple — invest in safer staking platforms and tokens. I know “safe” doesn’t exist in the world of crypto, but I’m talking about relatively safer investments. This year is going to be a busy year for me and my work, so it will be a hard task to keep up with these projects that move too fast.
I won’t be able to keep track of them and my investments if all I’m focused on is chasing high APYs. There’s always going to be the next shiny DeFi project, and I can’t invest in them all. It’ll be better to stay on the safer side right now and focus on building my crypto portfolio by staking safer projects.
I recently started a “savings account” with KuCoin that helps me get some return on my BTC. It’s not a big return, but at least I know my BTC can grow without my oversight. I can give high returns for safety for now.