Learning Center
Waves Labs
Dec 27,2022
6 minute read

6 Waves Ecosystem Project Myths Debunked

There have been a growing number of concerns made by the Waves community – some the result of wrong information, others, from lack of information, and all that need to be addressed with more clarity.

Let’s dive into and clear up any confusion related to these seven common misconceptions about Waves. 

Myth 1: Neutrino (USDN) is going to zero (pt. 1)

Q: The USDN reserve fund decreased by 10M WAVES with 5M WAVES left. Does this mean that this withdrawal rate will continue and drain the Neutrino reserve in two months?

A: No. Although the reserves have been decreasing, trend projections don't guarantee future outcomes.

The crypto market is undergoing a massive contraction and the data supports this claim. For over a year, trading volume has declined across the entire industry. In October of 2022, volumes reached lows not seen since December of 2020. Many other metrics of market activity are also decreasing. Market participants are running to safety as a result. Unfortunately, WAVES is feeling the same uncertainty. Liquidity and volumes have dropped drastically. This month is on pace to be the lowest in 2 years. Trends of this magnitude are not permanent however, and liquidity will return to the crypto market in time. This likely caused many investors to hastily withdraw WAVES from the Neutrino platform.

This bigger picture plays into the activity we’ve seen recently in Neutrino.Yes, participants are withdrawing from the protocol. No, there is no way of telling the rate at which WAVES is withdrawn or deposited. 

Myth 2: The Waves team is manipulating the price of USDN

Q: The current USDN sellers are only the team, and they are selling millions worth USDN a week, which will make the USDN reserve fund go to zero.

A: False. USDN is still held widely.

Many large USDN holders have not sold their USDN. It's a free market, so of course, selling is one of their options. The Waves team is committed to restoring the ecosystem, and have just revealed the USDN Resolution plan here. 

This is an extremely unlikely occurrence. Waves blockchain processed over 50K transactions a day across its many DeFi dapps and services. Many of the transactions include USDN. There are more than 4,000 unique wallets across BSC and Ethereum that hold USDN. This is confirmed and transparent with on-chain data. It is not possible for the WAVES team alone to generate this kind of activity.

Myth 3: Waves team is manipulating the price of USDN (pt. 2)

Q: Is the recent downwards price of WAVES a result of insider’s selling their stakes?

A: No. The BR is working as designed.

The Backing Ratio is not determined by selling per say but instead WAVES price which has been decreasing. It's definitely not controlled directly by the team. The nature of permissionless assets is that nobody can truly know who is behind certain actions. That being said, the WAVES team has publicly exposed their addresses and this is not their doing. 

Upbit and DAXA recently posted misleading news that has created massive volatility in WAVES price. Ill-informed Centralized Exchanges created a panic that led to aggressive short selling which had an outsized negative impact on WAVES price. This event is still unraveling and more volatility should be expected as a result.

As addressed previously, WAVES is part of a greater crypto trend. Many investors are fleeing to safety as a result of uncertain macroeconomic conditions. Panic is not isolated to WAVES. There is hope that the market returns to more reasonable and liquid conditions soon. 

Myth 4: The Waves team is manipulating the price of VIRES

Q: Is the core team manipulating the price of VIRES and giving 40% APY for the 3 month USDN lock up?

A: No. Vires is continuing as planned. Vires incentivizes investors to stake their tokens. 250 VIRES is emitted daily and distributed to stakers as transparently explained in the documentation

The emission of 250 VIRES a day is not the only source of the pay. Vires pays users who lock their tokens with protocol fees. These fees are the result of organic usage of the platform and are sustainable. It is a democratic model to distribute the profits of a decentralized finance platform. No additional VIRES is emitted for these rewards. 

Locking VIRES ensures an alignment of incentives between VIRES holders and VIRES TVL incentives for the platform. This is known as Liquidity Mining and is a similar mechanism to what almost all of DeFi projects use. Liquidity Mining was started by Compound with the COMP token which also happens to be a Money Market Protocol. The protocol pays users for the service of providing collateral to the market greater than the natural market rate, which is a mechanism designed to stimulate growth.

Curve Finance popularized the voting escrow token model. Here users receive additional token rewards for long-term governance responsibility in the protocol. The idea behind this model is to incentivize users to participate in the governance process and make informed decisions that align with the long-term interests of the protocol. By rewarding users for their participation and commitment to the protocol, the voting escrow model aims to foster a more decentralized and representative governance structure.

VIRES combines these two concepts with some additional innovation in their vesting models.

Myth 5: Waves team secretly changed the VIRES recovery plan

Q: Why did the Waves team stop vesting USDN from being unlocked in Vires?

A: The Vires team proposed changing vesting parameters and the community passed the Vires Finance Strategic Plan proposal. 

It is true that USDN vesting changed under the new Vires community agreement.

LPs are subject to roughly 10% APY vesting but the parameters to withdraw are different. Since the USDN price is below $0.95, there is no allocation for withdrawing vested USDN. LPs had the option to convert their vested stake to SURF, or the option to trade the vested LP token on WX Network (formerly WX Exchange) as alternatives.

This point was clarified in the recent AMA with Sasha where he apologized for the lack of clarity with the WX, and reaffirmed that withdrawals would begin processing as soon as January.   

Myth 6: WX Exchange has stopped paying out rewards

Q: Has WX Exchange (now WX Network) stopped all the pool incentives for USDT/USDN USDC/USDN and all the incentives are towards WAVES/USDN?

A: No. WX Network rewards incentives continue to pay out at a high rate.

Waves Exchange does the opposite of what's being alluded to. The highest rates on the exchange include BUSD/USDT as a base 101.79% APY, BUSD/USDC at a base 65.13% APY, and WX/USDT as a base 46.47% APY. On the contrary, WAVES and USDN are on the lower end of incentivization. 

The WAVES/USDN pool is at a base of 8.09% APY, much lower than other pairs. The key to this system is just that, incentivization. The rates are determined by which assets will bring the most stability and functionality to Waves Exchange. Currently, external assets like USDT, USDC, and BUSD are the most beneficial to the ecosystem and are incentivized accordingly. 

DYOR – Don’t Let FUD Win

These misconceptions about the Waves ecosystem and its projects, particularly USDN, Vires and WX Network circulate online quite quickly because they trigger fear, uncertainty and doubt (FUD) in the people that read them. 

It is important for the Waves community to see these myths for what they are: wrong information. The Waves team is committed to restoring the ecosystem and has shared the USDN Resolution plan to address concerns about the Backing Ratio and liquidity. It is important to keep in mind that the crypto market is currently undergoing a contraction, which has affected liquidity and volumes for WAVES and other projects. 

However, these trends are not permanent and liquidity is expected to return to the market in the future. It is important to stay informed and be aware of the facts when evaluating the health and stability of any crypto project.