Deep Dive into the Apollo DAO Warchest, Apollo token and Apollo Incentives
Please note that the data included in this article is constantly changing and therefore may be out of date at time of reading, but aims to provide a snapshot of Apollo DAO's early performance.
The Apollo token was released nearly 20 days ago, so we thought this would be a great time to give a breakdown of the Warchest performance so far, before we launch the much anticipated Apollo token incentives.
We will also go into a little detail of what the Apollo rewards will look like and how these enhance our long term vision of Apollo DAO, as well as some upcoming events we are excited for over the next few weeks.
The Apollo DAO Warchest
The Apollo DAO Warchest currently has a TVL of $6.6m:
So far the Warchest has been bootstrapped by revenue generated from Apollo DeFi offerings, primarily the Apollo CFE, as well the auto compounding vaults, which even without Apollo token incentives and a reduced performance fee have already generated nearly $30k in profit, with a run-rate of nearly $900k profit per year.
The Angel CFE has also raised nearly $1.5m for Angel, with roughly $75k generated for the Apollo Warchest. While these aren’t huge numbers compared to many DeFi projects, this is just the beginning for the Apollo DAO Warchest. We have already begun to deploy funds, starting with Stader, but have a number of other opportunities lined up.
Currently the majority of this is in Apollo LP, however this large amount of Warchest Owned Liquidity has managed to already generate roughly $90k in swap fees alone for the Apollo Warchest LP. While this is minimal compared to the IL, this Warchest Owned Liquidity will continue to generate long term profit for the Warchest, especially once additional incentives, such as Apollo and Astro tokens are live.
The Warchest also holds $1m UST in Anchor, earning $500 per day while waiting for deployment into Terra ecosystem projects and farming opportunities.
Apollo has deployed half of the Warchest’s Luna holding (5k) into the Stader CFE, which is currently earning $128 per day and will be used to purchase SD tokens at $0.43. Stader has just recently released LunaX, a liquid staking Luna and we believe Stader will help to continue to decentralise governance power of Terra validators.
You can read more about our deployment into Stader here.
This is all prior to token incentives, or return from any investments and provides an early glimpse at the long term sustainability of the Apollo DAO model, before we boost the Warchest revenue with Apollo incentives.
The idea behind the Warchest investment so far has been to invest a large percentage of the capital in projects with the most alignment and at earliest possible time, in order to minimize risk and maximize gains. While the Warchest may have seemed relatively slow in deploying capital, we have had a number of opportunities that we have had our eyes on for a number of months, and are very excited about the planned deployment.
Apollo DAO also has a strong focus on creating products and making investments in projects that are beneficial to the overall ecosystem, such as creating Apollo Safe, which will be free and open source, allowing all Terra users to access it.
The Warchest and the Apollo token
Currently the Warchest is still in the “Bootstrapping Phase”, meaning the focus is on generating as much revenue as possible, while distributing Apollo tokens to our users. This will provide Apollo with a large amount of capital to deploy and distribute the Apollo tokens widely to increase the decentralization of the Warchest governance. There will be three main phases for the Apollo Warchest, although there is likely to be overlap between phase 2 and 3;
- CFE Bootstrapping (9m Apollo tokens) - 3 months
- DeFi Protocol and bond Bootstrapping (41m Apollo tokens) - 3 years
- Liquid Warchest investments used to create a “floor price” of Apollo - ∞
For the first 3 years Apollo will be an inflationary token, however this will be balanced by the increasing value of the Warchest through performance fees and the selling of bonds. The Warchest will also be used to offset some of this inflation, by accumulating Apollo tokens, which can then be deployed to gain more revenue for the Warchest.
The overall aim of this inflationary period will be to maximise the size of the Apollo Warchest, while rewarding zApollo stakers and Apollo LPs with some of the yield farming rewards, rather than from the Warchest, in order to maximise its growth early on and provide sufficient liquidity to trade. This phase will also allow Apollo DAO to accumulate sufficient amounts of Apollo LP; in order to provide long term liquidity and facilitate efficient trading of Apollo even after incentives have ended.
After all 100m Apollo tokens have been distributed, Apollo will become deflationary due to a number of factors:
- Apollo token buy-backs
- Accumulation of Apollo tokens by the Warchest
- Accumulation of Apollo LP tokens by the Warchest
Even after Apollo emissions have ended, the Apollo Warchest will continue to generate revenue from its assets as well as fees from the Apollo DAO DeFi Protocols, such as our auto compounder. These returns can either be distributed directly to zApollo stakers, used for Apollo token buy-backs, continuously compounded in the Warchest, or some combination of all three. This deflationary phase will also be interesting in terms of meta-governance, as each Apollo token will have increased governance power, the less Apollo that is circulating.
Apollo Price Floor
At this point the idea is to have transitioned the Warchest into more liquid investments (farming, LPing, liquid staking etc.), as well as owning the majority of the Apollo LP, in order to create a strong price floor for the Apollo token. This will be done based on the relative value of the Warchest to marketcap and will use automatic buys to create a predetermined price floor. This price floor will allow Apollo tokens to become an exceptional collateral asset, as users will be able to borrow against them below the price floor and have a very low risk of liquidation.
This is a key tactic in allowing Apollo holders to continue to be exposed to the Apollo price, while providing a way for them to simultaneously increase their liquidity, or leverage up their position with minimal risk. Similar to the (9, 9) concept from Olympus.
While this is currently the idea around the long term evolution of the Warchest, we are yet to introduce Apollo governance staking and voting. Therefore this could all change, evolve and improve as more ideas and discussions are brought to the table by community members, something the team is very excited about, based on the great ideas and amount of discussion we have seen so far.
The Apollo governance staking will be similar to both Curve and Astroport's governance staking, where in order to gain governance power, users will stake Apollo tokens for a set period of time, up to 2 years and will receive more zApollo per Apollo token lock, based on the amount of time. For example, if two users lock up 1k Apollo tokens each, with one locking for 1 month and one locking for 4 months, the user locking for 4 months would receive 4x the rewards and have 4x the governance power of the other user.
We believe this is the most effective way to align Apollo voters with the long term success of Apollo DAO. zApollo governance is now one of our top priorities to get live.
zApollo stakers will be able to vote on:
- Deployment and management of the Warchest
- Which tokens to accumulate through farming and bonds
- Direction of new DeFi protocols
- The Apollo performance fee and therefore the profitability of the vaults
- Which Apollo vaults to boost with additional rewards
- Meta-governance of other Terra protocols through Warchest holdings
- Ratio of bootstrapping the Warchest vs paying rewards to stakers
- With much more utility coming in the future.
Staking zApollo will also be the only on-going way to receive yApollo tokens, which will be an additional bonus token for our loyal stakers, that will allow them to access discounts on NFT boosters and other products in the future. This is something we are still working on and we will be releasing more information on this soon.
Apollo Governance and Terra DAOs
We also expect and would encourage other Terra protocols to participate in the Apollo DAO governance, as we believe this would encourage proposals that are beneficial to the overall Terra ecosystem. There would also be a number of direct benefits for these protocols as they would be able to boost rewards to their LPs both in Apollo tokens, as well as other token boosts through meta-governance, meaning they could reduce their own inflation while maintaining the same APY for their LPs.
Protocols would also be able to make proposals for treasury swaps, and the accumulation of certain tokens, as well as utilize the Apollo Warchest as a market-maker. While there is potential for this power to be abused, we believe that by giving the most governance power to those who lock up their tokens for the longest, it will be extremely difficult for large players to take over governance and make decisions that would negatively impact the Apollo DAO, without also having a large impact on themselves.
Apollo DAO token incentives
There are currently 41 million Apollo tokens to be distributed with the sole purpose of efficiently bootstrapping the Warchest over 3 years and this will be done through Apollo rewards for our LP vaults, Apollo bonds, as well as additional ways in the future.
These 41 million Apollo tokens will be distributed linearly across 3 years:
As the Apollo tokens are distributed linearly, we are using the performance fee (PF) to regulate the amount of value the Warchest gains, vs the value of Apollo tokens distributed. The aim of the Apollo token incentives is to attract capital to the Apollo auto compounder, while not providing too much of a discount on the Apollo tokens distributed.
Here the “% Discount” shows the discount on Apollo rewards that farmers would be receiving by using Apollo, vs the value going to the Warchest. As you can see with a static performance fee at 30%, with $60m TVL farmers would receive a huge discount on the Apollo token of over 70%,which would also mean that inflation of the Apollo token would begin to outpace the value accrual of the Warchest. On the other hand, it would become increasingly unattractive to farm on Apollo as the AUM increased.
In the short term, having a lower performance fee could be beneficial as it would attract more capital due to the better returns, which would in turn begin to balance out the percentage discount on Apollo tokens.
Our answer to this is to have a variable performance fee that will initially be set by the Apollo team, and then handed over to zApollo governance. The long term idea is to have it fully automated, with zApollo stakers deciding on the parameters.
As you can see from the above example (just an example), Apollo can maintain a more constant revenue and provide a consistent discount on the Apollo token based on the AUM, while also providing a constantly attractive platform to farm on.
Below is a basic example of how this could work for a user, providing the maximum amount of revenue for the Warchest, while also providing benefits to the user.
While there are a number of other factors here, such as the Apollo token price and the average APR on the Apollo platform, we hope this provides some insight in how we can balance token incentives with the revenue generated for the Warchest. The other factors that voters may take into consideration is how quickly the Warchest is looking to generate revenue and the returns it believes it can get on that capital, vs the discount it wants to offer Apollo tokens to farmers at.
Apollo token incentives will be weighted to the vaults which generate the most revenue for the Warchest. These are often the highest risk vaults and we therefore feel it is most effective to increase the rewards proportionally for these users.
Tracking the Warchest
We will continue to work on improving ways in which the community can track the Warchest. Currently the best way to track the Warchest is:
- Luigi's Dashboard - Kindly created by one of our OG's
- Ape Board
Next Steps for Apollo DAO
- The next big step for Apollo will be the Apollo token incentives going live, which unfortunately were delayed by audits, but will be ready any day now. This will provide a huge boost to the amount of revenue the Warchest can generate, accelerating the DAO’s ability to deploy that capital into the huge amount of opportunities coming to Terra and the wider crypto ecosystem. This will also allow the Apollo Warchest to farm Apollo tokens with its own capital, locking these out of supply.
- After this, the launch of Astroport will be huge for Apollo; as DEXs are crucial for yield platforms like us. Not only will the DAO be able to deploy its own Apollo LP to accumulate $Astro tokens for the Warchest, but we believe that long term Astroport will be a huge boost to the Terra ecosystem, creating more sustainable yields and delivering first class products. It will also open up a large number of new vaults that Apollo can add, such as Luna-UST, Luna/bLuna etc.
- Beyond this we will be looking to introduce Bonds in order to increase the effectiveness of bootstrapping the Warchest. While the exact time frame and method is TBC, it is something we are interested in introducing asap.
- zApollo token staking is one of the top priorities and will be coming soon. This is part of a large push we will be making towards decentralisation Apollo DAO in the next months and years. This will not be done in one go, but in a number of stages to ensure the community is fully supported with all the tools required to run Apollo DAO. We will be releasing a lot more information about how we plan to do this shortly.
- We are also looking forward to the launch of Mars, which we believe will bring a huge amount of utility to Terra.
- There are also a large number of Terra projects launching early next year, which we feel will be beneficial to the general Terra ecosystem as well as Apollo DAO. We have a number of exciting opportunities for the deployment of the Apollo Warchest and we look forward to announcing them in due time.
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