FAQ
The new DeFi 2.0 model pioneered by OlympusDAO created many new exciting opportunities in the DeFi space. While there have been many implementations of reserve currencies, we believe there is still a lot of room for experimentation.
Leveraging our experience with yield farming and building DeFi indexes, the team has built Cesta Finance to create a better reserve currency that best reward our community in the long term. This is done via creating a range of indexes that are made up of diversified yield generating LP positions, and using these index farms for the CESTA token bonding. This allows the Cesta treasury to not only hold pegged stablecoins and its own tokens, but also yield-generating diversified indexes that should have better return in the long term.
There are six people on the team at the moment: 1 community, 1 marketing, 1 founder, and then 3 developers.
Jon (jon.c#4793) - Founder
JK (JK_Remote#5045) - Marketing
Peng (PENG 🏴#2282) - Community
Cesta team is very intrigued by some of these rebase tokens, started by OlympusDAO and the forks. But there's one problem that not a lot of people are talking about. The natural issue of these projects is that the reserves in the Treasury are backed by tokens, and they're not generating a lot of yield. And also, they're very heavily relying on the tokens that the LPs have.
When the market goes through the bear market, we see that the positive feedback loop becomes a negative feedback loop and essentially the token price starts to drop. This means that the bond sales and the hype die down. Eventually the Treasury will go down,too. And then there's less APY, and it feeds, it feeds itself again, until it regains the market traction.
So Cesta wants to address this problem and tried to solve. What Cesta does is basically taking huge yield-generating assets, and diversify a basket of indices, generating yield to back the Treasury. So even as the token of the price corrects itself, because the Treasury is backed by a lot of these utility tokens that have a real use case, it would appreciate and generate yield over time.
This is the combination of the best of DeFi 1.0, which is a lot of yield mining, and your mining rewards and DeFi 2.0, the OlympusDAO’s reserve currency token model on top.
Combining the best of both worlds.
Cesta has built different kinds of profitable and proven investment strategies and use for bonds to back our tokens. And so these indexes and these yield generating assets are going to propel the token and the Treasury to really keep it going.
So even if users don't want to do anything to do a protocol token, it's still a very viable investment strategy. And it provides auto-compounding yield generating indexes, supercharging.
Avalanche is a new fast growing blockchain. Avalanche raises $230M from private sale to support projects on the blockchain, especially the DeFi ecosystem. Cesta Finance is built specifically on Avalanche, so that users can enjoy the higher APR return while mitigating the risk with some of our best features that we use in Ethereum strategies. The higher throughput of Avalanche also allows users to minimise transaction costs and increase accessibility for all users.
We’re planning the IDO in late January, and all information will be available through the official channels, such as Medium, Discord, and Twitter.
With POL, Cesta Finance controls most of its liquidity. Here are some key features:
- Owned Liquidity: All TVL is interest generating assets; ie, USD stablecoins, Cesta Invest LP tokens etc.
- Asset-backed: CESTA tokens are backed by CESTA Treasury’s POL.
- Income generation: All assets produce yield via Index Fund strategies.
Protocol Owned Liquidity (POL) provides asset-backed-reserve to guarantee the value of all CESTA tokens.
CESTA is neither an asset nor stablecoin. Rather, CESTA is designed to be an algorithmic governance token backed by other decentralized assets.
Each CESTA is backed by a value of LP token from Cesta Finance index fund strategies, LP tokens from other protocols and stablecoins. Because the treasury backs every CESTA with tradable assets, the protocol would buy back and burn CESTA when it trades below the treasury value. This has the effect of pushing CESTA price back up.
CESTA could always trade above $0.1 because there is no upper limit imposed by the protocol. We believe that the actual price will always be $0.1 + premium, but in the end that is up to the market to decide. Whichever the case, the investors will continuously make profit by contributing to the Cesta Finance ecosystem via the bonding and staking mechanism the case, the investors will continuously make profit by contributing to Cesta Finance ecosystem.
At a high level, CESTA consists of its protocol managed treasury, Protocol Owned Liquidity (POL), bond mechanism, and staking rewards that are designed to control supply expansion.
Bond sales generate profit for the protocol, and the treasury uses the profit to mint CESTA and distribute them to stakers. With liquidity bonds, the protocol is able to accumulate its own liquidity.
Two parts.
- 1.Cesta token and our rebasing model. CESTA token is built on top of a diversified long term appreciating assets, through Cesta Index Funds. This is basically taking a bond sales of token and profit/revenue generated through that( similar to OlympusDAO and HectorDAO model). So those would give the users a bond to a token. And if you stake it, you can easily generate a six digit APY on your staked token.
- 2.The underlying investment strategy. This product is to generate yield without interacting with CESTA tokens. So if the users go to their website and invest into our strategies, and if we take stablecoin strategies, we're looking at about 16% APY, and that's purely on stablecoins. If you're more aggressive, if you want to be more risky and invest in Avalanche tokens with DEX, it ranges from around 50% APY to over just over 100%. Because a lot of these tokens are still offering a lot of incentives on the indexes.
Essentially Cesta invests into liquidity pools made up of Avalanche Trader Joe Pangolin, Lydia Finance and a bunch of stablecoins or other protocol tokens. We are taking a lot of these protocol tokens and then we're diversifying in some of top DEXes. Please take a look at our index funds here.
Cesta Finance is carefully designed so that the more the community contributes to the protocol, the greater benefit the community enjoys. On that note, there are 4 different action types market participants can take: locked, staking, bonding, and selling. While locked, staking and bonding are considered beneficial to the protocol, while selling is considered detrimental.
Staking and selling will cause a price move, while bonding does not (we consider buying CESTA from the market as a prerequisite of staking, thus causing a price move). Now we can imagine these scenarios:
- If both actions among above 4 are beneficial, the market participant who moves price gets half of the benefit.
- If both actions are contradictory-one good and one bad, the bad actor who moves price gets half of the benefit, while the good actor who moves price gets half of the downside.
- If both actions are detrimental, which implies both actors are selling, they both get half of the downside.
Naturally the market participants are inclined to take beneficial actions, both for their own good, and for the community's good.
It is extremely important to understand how early in development the Cesta Finance is. A large amount of discussion has been centered around the current price and expected a stable value moving forward. The reality of token price is that these characteristics are not yet determined. The network is currently tuned for expansion of CESTA supply, which when paired with the locked, staking, bonding, and yield mechanics of CESTA, result in a fair amount of volatility.
CESTA could trade at a very high price because the market is ready to pay a hefty premium to capture a percentage of the current market capitalization. However, the price of CESTA could also drop to a large degree if the market sentiment turns bearish. We would expect significant price volatility during our growth phase so please do your own research whether this project suits your goals.
When you buy and stake CESTA, you capture a percentage of the supply (market cap) which will remain close to a constant. This is because your staked CESTA balance also increases along with the circulating supply. The implication is that if you buy CESTA when the market cap is low, you would be capturing a larger percentage of the market cap.
APY stands for annual percentage yield. It measures the real rate of return on your principal by taking into account the effect of compounding interest. In the case of Cesta Finance, your staked CESTA represents your principal, and the compound interest is added periodically on every epoch (around 8 hours) thanks to the rebase mechanism.
One interesting fact about APY is that your balance will grow not linearly but exponentially over time! Assuming a daily compound interest of 2%, if you start with a balance of 1 CESTA on day 1, after a year, your balance will grow to about 1377!
There is no clear answer for this, but the intrinsic value can be determined by the treasury performance. For example, if the treasury could guarantee to back every CESTA with $100 from the Index Fund, the intrinsic value will be $100.
Last modified 1yr ago