There are many options available at the moment to make money in the Crypto world. If you believe in Polkadot, great times are here since the first Parachain Slot Auction started, and you can invest in your favorite project. But which project to choose to maximize the possible rewards and return on investment?
It is not an easy or obvious decision on which project to invest in. The rewards of some of the Kusama Slot auctions were sick, but since the hype of the Polkadot Parachain Slot auction is even more extensive, you may ask yourself, is it even worth it to contribute.
This article will introduce how I am trying to estimate the upcoming rewards based on numbers and previous projects and make my investment decision based on those numbers.
We will analyze one of the projects with the biggest communities in the Polkadot Ecosystem. Moonbeam is a smart contract blockchain launching their $GLMR native Token.
You do not know how to contribute to the Polkadot Crowdloans or how the Candle Auction Format works; then you can check out my previous article about "What are Polkadot Parachain Slot Auctions and how to take part?"
Do not forget this is not financial advice; I am crunching some numbers to improve the chances of making a sound investment decision. It would be best if you did your own research. (DYOR)
What am I looking at in my quick analysis, and how do I find out if a project is worth investing in.
Let's go through it step by step with Moonbeam as an example; of course, you can or should do this with any other project you want to analyze.
Fundamentals - Moonbeam GLMR
In the fundamentals, we try to see which category the project is fitting in, what value they are providing, who the Team is, how many investors and grants they have, and what specials they offer.
Category of the Project: Smart Contract Platform, EVM compatible
Moonbeam is an Ethereum-compatible smart contract platform. Moonbeam provides EVM implementation and Web3-compatible API. With these tools, Moonbeam allows developers to port their existing contracts from Ethereum and write new applications in Solidity. It's built using the Substrate framework and will eventually be a parachain within the Polkadot ecosystem.
Derek Yoo - CEO and Founder
Stefan Mehlhorn - COO
Tim Baldwin- VP of Engineering
Alan Sapède- VP of Blockchain Engineering
Katie Butler - Director of Marketing
Nathaniel Hamilton - Director of Business Development
Eleven institutional investors invested in the Moonbeam project. Some of them are the Binance Labs, Bitcoin.com, CoinFund, Coingecko Ventures.
Moonriver made a Community sale (10 % sold) with no vesting period. That could mean that there is very high selling pressure at the token generation event. The price of 1 GLMR was 0.25 USD. More information on ICODrops.
W3F Grants: 2
How many grants did they receive from the W3Foundation? Moonbeam received two.
💡The Web3 Foundation supports teams that are building the foundation of the decentralized web software protocols. Especially the utilization of modern cryptographic methods to safeguard decentralization is supported.
No special rewards.
The Ticker of the Token is GLMR
Maximum Supply: 1.000.000.000
Maximum Supply of the Token.
Inflation: 5 %
Moonbeam targets an inflation rate of 5% and has an uncapped token supply.
The inflation mechanism is used to perpetually keep the network secure, pay for the parachain slot auction after the first two years, and incentivize block producers. 1 % will directly go to the block producers, 1,5 % goes to the parachain bond reserve. 2,5% go to users who are staking their GLMR Token.
80 % of the Moonbeam Fees are burned as a deflationary force, and 20 % will go to the treasury. That 20% can be allocated via on-chain governance to projects and initiatives that further drive and develop the network.
Team: 25 %
Altogether 25 % are reserved for the founder & current Team, future team members, advisors, and key partners. The team funds are locked for one year and then vested over 36 months.
All together, institutional investors and investors out of the community get 46% of all the tokens. 20 % to the Crowdloan and the "Take Flight" Community Investment Event. The Crowdloan is vested over two years with an initial reward release of 30 %. The take flight rewards are released 100% after a 40 days lockup.
Liquidity & Reserves: 14 %
Totally 14 % are reserved for Liquidity and Reserves. This includes Parachain Bond Funding, Parachain Bond Reserves, Treasury and Liquidity Programs.
Research & Development: 15 %
Totally 15 % are reserved for Research and Development. This includes Long Term Protocol and Ecosystem Development.
Parachain rewards: 10%
The rewards will be "only" ten percent, which is comparatively low to other launching projects and also low compared to the Kusama Parachain (Moonriver was around 30 %) rewards. The community is not happy about that. It is the lowest percentage share.
There are no special rewards.
There are no compensations if no slot is won. For now, it looks like Moonbeam will win the second slot of the Parachain Slot Auctions.
Expected Marketcap in $:
Marketcap in a similar project
Expected circulating supply: 35.000.000 GLMR
Moonriver had an initial supply of around 22%.
It looks after launch, only the 30.000.000 GLMR of the Rewards are released immediately, and then, after one month, the 100.000.000 GLMR Token of the "Take Flight" event. Then slowly, Tokens for Seed funding, Strategic Funding, and the Team seems to be released partly. If you want to get your (parts of) investment money back immediately, this appears to be a good opportunity if you sell the 30 % of your Rewards after you get them.
Max supply: 1.000.000.000 GLRM
Expected Price: 38,4 $
The price we expect for the launch.
Market cap expectation: 5.372.000.000 $
around 8 times the initial Marketcap of Moonbeam
Expected Reward Calculation
Hardcap: 100.000.000 $DOT
The hard cap for the contribution is 100.000.000 $DOT. That would be around 4,2 Billion USD at the current market price ($USD) for DOT.
% in MC / DOT: 10 %
If the hard cap of the auction is reached, that would mean we got 10 % of the Marketcap of Polkadot DOT.
This is manually set based on the research and means how much bigger we believe Moonbeam is than Moonriver. Polkadot is about ten times bigger than the Kusama Network, and Moonbeam is even more hyped than Moonriver, so we choose a factor of 17. This would translate to around 1.5 Billion $ raised.
Expected money raised: 1.5 Billion USD.
Money raised by the sister project on Kusama, Moonriver * the Factor.
% in Hardcap: 36%
The expected money raised would mean that they hit 36% of their Hardcap.
% of DOT Marketcap: 3,6 %
This would be around 3,6 percent of the total DOT Market capitalization
Expected Reward: 2,78 GLRM
With these numbers, the expected reward would be around 2,8 GLRM Token.
% of DOT AS: 25 %
% of DOT available for the Slot Auctions. The available supply is calculated by the total circulating supply minus the staked $DOT. If the hard cap is reached, 25% of all available Polkadot Tokens were reserved for Moonbeam.
Moonriver sister project on Kusama
Reward Distribution: 30/70
30 % are distributed initially, and 70 % will be distributed over 24 months.
Twitter followers: 144.000
Github Activity: 99
Telegram users: 36.000
Discord Users: 35.000
As you saw, we used Moonbeam as an example to explain my thoughts on the upcoming Crowdloans. I will also analyze other forthcoming projects with the same model.
As a general strategy, I would suggest not to go in early if you are unsure if you want to support a particular project or not. In general, we think you will not lose money on the main projects, but the rewards highly depend on how many DOTs are contributed to a project. I will wait with my contribution until it is clear who will win the slot and how the total contribution will look like to have a better estimate on the rewards.
Nobody knows how the Marketcap and the price will develop for sure; this calculation should help you get a better idea of how things could develop to not be totally in the dark with your contribution. Do not forget your DOT will be locked up for a maximum duration of two years, so there are opportunity costs as well.
If you want to invest in a project that gives a bigger junk of your investment right, in the beginning, Moonbeam might be the right choice. 30 % of the rewards will be distributed in the form of GLRM Token right after the launch, and the Moonbeam distribution schedule shows there should be an initial supply of around 30.000.000 GLMR Token, which seems like a great chance to sell some of the rewards and take cash out if you like to. The Token release schedule shows Token for the Team and investors just to be distributed after a month or two after the reward was already distributed. An interesting detail, in my opinion.
My estimation is the average case, i am not considering time increase of DOT or the GLMR Token over time. The rewards over the period of time should be way higher than in my model. I just take the estimated launch price in consideration.
I will probably split my contribution on the Top projects and go in with a good amount of my total portfolio.
Kudos to Jaze - Crypto Insights, who gave me the inspiration for this article. I took his model and combined it with mine, and this is the outcome.
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Enjoy and stay weird.
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