The Codex Team feels it is beneficial to share knowledge with all Templars. Below you can explore flashcards on various topics related to the crypto world, with a bit of relevance to TempleDAO.
We plan to publish new flashcards periodically to support the community.
Let us know other topics you want, and we will answer your prayers. WAGMI
Game theory is the mathematical model of strategy.
Game theory allows one party to determine the best decisions based on another party’s potential decisions.
Here is a common example of game theory:
You and a friend are arrested. The police place you in separate holding rooms for questioning. Neither of you had time to agree on a plan, so you do not know what decision the other will make: will they confess or will they stay silent?
The common example game theory in real life is if you and a friend are arrested and placed in separate rooms, do you confess or stay silent? Below are are the scenarios to consider.
- You = Confess | Partner = Confess
- Outcome → You = 2 years | Partner = 2 years
- You = Confess | Partner = Silent
- Outcome → You = 2 years | Partner = 5 years
- You = Silent | Partner = Confess
- Outcome → You = 5 years | Partner = 2 years
- You = Silent | Partner = Silent
- Outcome → Both go Free
If you confess, the best and worst outcome are the same: jail sentence of 2 years. If you stay silent, the best outcome is better BUT the worst outcome is worse when compared to confessing. To control the risk or jail time you face, the best option is confess to avoid the worst case scenario.
When applying game theory to Temple, one question you could ask yourself is do I stake or sell and what will other Templars do? Constructing a scenario similar to the example and identifying factors can help determine your risk level and the best decision for you.
Further explanation: https://www.investopedia.com/terms/g/gametheory.asp
ANNUAL PERCENTAGE YIELD (APY)
Annual Percentage Yield (APY) is the projected rate of annual return after taking compounding interest into account.
To determine APY, we must understand Annual Percentage Return(APR). APR is the return for 1 year without additional compounding interest.
If you have $100 and the APR is 100%, after one year you will have $100 (initial) + $100 (return) = $200. If you have $100 and the APR is 50%, after one year you will have $100 (initial) + $50 (return) = $150.
APY factors is the ability to compound the return. In other words, APY assumes a return at a specified frequency. This return frequency could be daily, monthly, quarterly, etc. It could be any time period.
Factors that determine APY are the initial investment amount, annual percentage return (APR) compounding period (daily, monthly, quarterly) and length of time of investment.
To calculate APY, use the following formula:
APY = (1 + r/n)^n - 1 r = fixed interest rate n = compounding period
If you deposited $100 for one year at 5% interest and your deposit was compounded quarterly, at the end of the year you would have $105.09. If you had been paid simple interest, you would have had $105.
The APY would be (1 + .05/4) ^ 4 - 1 = .05095 = 5.095%.
Temples APY is calculated based of the Daily return of 0.7% which calculates to an APY of 1177%
Current staking rates are:
0.7% per day (~1200% APY) with no lock for $TEMPLE from AMM
0.9% per day (~2500% APY) with six week lock for Opening Ceremony Guests
1.0% per day (~3700% APY) with six weeks lock for Opening Ceremony Pilgrims
Rebase tokens are tokens which continually mint extra token to offer as rewards in the form of APY to token holders, in order to attract more investment. Minting new tokens and distributing them dilutes token value, but as long as new capital keeps flowing in, token holders will make a profit by the increase in the amount of tokens they hold over time.
Examples of rebase tokens are OHM, TIME, BTRFLY.
Temple does offer APY rebase rewards, but not at the same high rate as other protocols so as to avoid diluting the value of TEMPLE in the long run. It is a safe haven for users who seek refuge from crypto volatility while enjoying steady growth.
AUTOMATED MARKET MAKER (AMM)
An Automated Market Maker (AMM) is a system that provides liquidity to the exchange it operates in through automated trading. Simply put, it is a place to trade currency for other currency. The liquidity pool is the market, and it automatically makes trades possible.
On an AMM-based decentralized exchanges, the traditional buy-sell book is replaced by liquidity pools that are pre-funded by other users who earn passive income through trading fees based on liquidity pool percentage. One person must buy from someone looking to sell, and the AMM and other user provides currency to the pool, make fees.
For example, if a user provides x number of Token A and y number of Token B as a pair into a liquidity pool, other on-chain users can swap Token A for Token B and Token B for Token A. The AMM LP provider will receive a trading fee, and the AMM user will be able to swap tokens.
If there is no liquidity pool for a token pair, then a user can not swap those tokens, and no AMM exist.
Examples of AMMs are sites such as Uniswap, Sushiswap, etc
The TempleDAO AMM allows you to sacrifice FRAX for $TEMPLE, and sell $TEMPLE for FRAX.
RISK-FREE VALUE (RFV)
Risk-Free Value (RFV) is the claim users have for each $TEMPLE token they own if the protocol intended to distribute all its assets to them. Simply, if all the money TempleDAO owns needed to be distributed to all $TEMPLE holders, RFV is how much is each $TEMPLE is worth.
RFV is the sum of assets owned by Temple (not including native tokens) divided by the amount of Temple tokens held currently by and promised to users by the smart contract through staking and other mechanisms.
RPF = TEMPLE ASSETS / TEMPLE SUPPLY
EXAMPLE, TEMPLE RELATED AND LINK
To see the simple RFV metric for can be seen on Dune Analytics AMM Key Metrics Dashboard
INTRINSIC VALUE (IV)
Intrinsic Value (IV) is the measure of what an asset is worth. IV is a smart contract value for the Temple price at which the protocol is guaranteed to buy back tokens sold on the AMM (ie Floor Price). Simply put, IV is the AMM Price floor. While $TEMPLE is above a threshold price, as the treasury grows, so does IV.
IV (or Intrinsic Value) is the AMM price floor, ie the price at which the protocol will buy TEMPLE tokens on the AMM from sellers (and burn them) against its FRAX reserves.
EXAMPLE, TEMPLE RELATED AND LINK
View the TempleDAO AMM to see IV at https://templedao.link/
Stablecoins are tokens that exist on blockchains / on a blockchain with zero volatility or price change.
The value of a stablecoin is determined by the value of a real-world asset such as gold or a physical fiat currency like the U.S. dollar.
Stablecoin’s prices do not fluctuate with the market.
Most popular stablecoins are equal to $1 USD. These are specifically called dollar-pegged stablecoins. Non-pegged stablecoins do exist, and the price is determine by other protocols.
Examples of stablecoins are FRAX, Tether, USDC, Dia, and many more
At the time of writing this, all $TEMPLE holders had to sacrifice the stablecoin FRAX to purchase $TEMPLE. This allows the TempleDAO Treasury to remain unaffected by market volatility.
Inflation is the decline of purchasing power of a given currency over time. Inflation can be contrasted with deflation, which occurs when the purchasing power of money increases and prices decline. Simply put, inflation means you can buy less with the same $1.
Inflation is the rate of rising prices of goods and services in an economy. Inflation is not necessarily good or bad, it is a variable within the economy that can be controlled. Uncontrollable inflation or deflation is always bad for an economy.
A simple example of inflation is when a country prints money without a value to back it, such as gold. As a result, the value of all printed money decreases.
All over the world gas prices consistenly inflate and deflate depending on the factors above.
This can be applied to multiple goods and services in any economy.
The effect of inflation on $TEMPLE would be seen at a macro level and would ultimately effect the entire crypto market and not necessarily only $TEMPLE.