The Wonderland DeFi Token Explained

The Wonderland DeFi Token Explained 

It has been a wild roller coaster ride for Wonderland DeFi investors so far. The experimental protocol launched in September 2021 as one of a growing number of questionable Olympus-forks. Wonderland DeFi was a market first for a variety of reasons.  Notably, it was one of the first networks built to run on the advanced fourth-generation Avalanche blockchain.  

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Avalanche leverages a multi-blockchain ecosystem to provide scalability and low fees. Many developers have migrated their protocols to the network to provide a better user experience and to avoid crushing gas fees on networks like Ethereum.

Today, the protocol boasts a large community with over $565,099,888 in its treasury balance and 879,792 staked tokens. The platform managed to secure a sizeable following due to its unique technical characteristics and support from both the Avalanche and Olympus communities.

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The Show is Over

However, it looks as if the curtain is set to close on the Wonderland proof-of-concept. The project appears to have failed after a community-led vote on whether to keep the protocol going resulted in a 50/50 split. The co-founder of the project, Daniele Sestagalli, took to social media to share the news with the rest of the crypto community. 

He explained that the vote was so close that it was obvious the project didn't have enough community support to succeed. Sestagilli explained that the vote is "so close to 50/50 there is only one path forward, it is to reimburse/unwind.” Now, the once hyped AVAX-backed stablecoin is set to call it quits with investors eager to learn their fate. 

Ran Out of Time

The project's stablecoin and governance token, TIME, was touted as a more transparent alternative to fiat stablecoins because it utilizes cryptocurrencies as backing, making the entire process and accounting visible to anyone with a blockchain explorer. This style of stablecoin is also more cost-efficient because it doesn’t require a third party to audit, store, and secure reserve assets. Notably, TIME utilizes AVAX as its reserve currency. 

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Wonderland DeFi Problems

Wonderland DeFi has been plagued with problems since day one. The protocol's token plummeted 40% in value in just two hours two weeks ago from $1,400 to $832. This loss in value brought the token below its intrinsic value, meaning it was below its pegged assets in market value. The developers behind the project were forced to step in and conduct buybacks to help bolster the token. 

These actions are similar to when governments step in with quantitative easing to artificially stabilize the stock market. Both are drastic decisions that can signal a project is in a dire financial crisis. Notably, the Wonderland DeFi protocol purchased millions in TIME tokens to bring the price back in line with its treasury-backed value.

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Reasons for Wonderlands Downfall

This price reduction can be attributed to multiple factors including revelations that Wonderland DeFi's treasury head, Michael Patryn (0xSifu), had an extensive rap sheet. The news rocked the community as it revealed that Patryn had previous convictions ranging from credit card fraud to other financial schemes. It also didn't help Wonderland's cause when the same report revealed that he was the co-founder of the now-defunct cryptocurrency exchange, QuadrigaCX.

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A Look into Wonderland DeFi's Services and Benefits

The Wonderland DeFi ecosystem was pitched as a high yield generation system. The protocol combined staking features with compound interest with the goal of enabling anyone to generate profits with little risk. According to company documentation, the original goal of the project was to create a "policy-controlled currency system." 

Unlike the competition, this network would leverage Avalanche with the ability to bridge across different chains. The protocol combined a new utility token called TIME, with stability-based smart contracts to create a stable asset. The token was able to achieve price flatness without the use of fiat currency. 

The developers saw this as a major accomplishment that could help lead to a further decoupling of the cryptomarket from the fiat sector. The end goal being the creation of a completely independent financial system. 

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OHM Forks Continue to Raise Questions

Olympus has seen a variety of forks over the last couple months which have led some to debate over their usefulness. These forks have earned the nickname "OHM Forks." They are growing in popularity but some analysts have gone as far as to label these forks part of a Ponzi scheme. 

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The Fairy Tale is Over

Much like the kids tale Alice in Wonderland, the time has come for this adventure to close the book. It’s vital to understand that experimental protocols like this may not succeed in full, but certainly their technological advancements will live on through future projects. 

In the end, protocols like Wonderland DeFi are part of the growing process for the DeFi market. They help to drive adoption while highlighting new areas of concern for other projects to avoid. As such, Wonderland DeFi has made the market stronger despite the interim price losses it caused and its overall failure to perform as promised.