Yield Farming Algo-Pegged Crypto on Tomb Finance — Fantom Explained

6 min readNov 27, 2021

Tomb Finance is a decentralized yield protocol native to the Fantom Opera network. Tomb’s token, TOMB, aims to be the backbone, main medium of exchange and main source of liquidity for the network.

This is not financial advice. Do your own research. The author discloses a small position on Tomb.Finance.

As of writing this post, Tomb.Finance has over $600 million USD total value locked¹ (TVL). It is the highest Fantom-native yield protocol by TVL, sits at #14 by TVL across all blockchains¹, and boasts some of the highest yield rewards on Fantom.

Fantom is an emerging, highly-scalable, layer 1 blockchain with a revolutionary consensus model that can reach transaction finality in 1–2 seconds. It also is fully compatible with the Ethereum Virtual Machine, meaning that solidity contracts written for Ethereum can literally be copy and pasted and deployed on Fantom. Fantom’s low fees and sub-2 second transaction finality make it, and Tomb.Finance, an easy entry into the world of decentralized finance with tremendous room for growth.

Yield Farming Opportunities

Liquidity pools in “The Cemetery” for the pairs TOMB-FTM and TSHARE-FTM. Yields are currently floating between 200–500% APR¹. These LP farms reward TSHARE.

Staking TSHARE in “The Masonry” rewards TOMB at a yield of 400–500% APR¹.

The “go-to” strategy is to provide liquidity with FTM-TOMB, receive TSHARE, stake TSHARE, receive TOMB, swap 50% of the TOMB for FTM, buy FTM-TOMB, stake FTM-TOMB. Rinse and repeat.

Outside of the Tomb Protocol there exists auto-compounders/aggregator vaults such as Reaper.farm and Grim.finance. On these platforms, the TOMB-FTM and TSHARE-FTM vaults trade the TSHARE rewards for more LP and the TSHARE vaults trade the TOMB reward for more TSHARE, automatically.

Tokenomics

TOMB, TBOND, TSHARE

The TOMB token is algorithmically pegged to FTM (Fantom’s native coin). It does this by dynamically adjusting TOMB’s supply, which pushes its price up or down relative to the price of FTM. Tomb.Finance believes in Fantom, the ecosystem, and its potential to disrupt the cryptocurrency space. So they are aligning themselves directly with the success of Fantom.

An epoch on Tomb.Finance is 6 hours long. Roughly speaking, that means that “things happen” every 6 hours such as interest compounding, reward distribution, TOMB supply rebalancing, etc.

TOMB is minted as a reward and proportionally distributed to TSHARE stakers each epoch.

However, TOMB is not collateralized, so the algorithm alone does not guarantee 1:1 parity. The price of TOMB should be “close” to FTM.

The algorithm can control the emission, or minting, of TOMB — but it cannot control the TOMB that is already distributed and in circulation. Tomb.Finance has two mechanisms to help stabilize the price: TBONDs and Buybacks.

TBONDs

This is where things get a little complicated.

If the TWAP (time-weighted average price) of TOMB goes below peg (1 TOMB is less than 1 FTM), TBOND becomes available for purchase in exchange for TOMB.

This burns (or deletes) the TOMB tokens from circulation which helps get the price back up to, or above, 1 FTM.

TBONDs are issued in the amount of 3% of the current TOMB circulating supply per epoch, up to a maximum debt amount of 35% (no more than 35% of all circulating supply).

TBOND holders may redeem their TBOND’s for TOMB so long as the TOMB treasury has a positive TOMB balance. They can also be viewed as an investment in the protocol. Depending on the TWAP, the bonds may be redeemed for an additional bonus amount.

DAO Buyback Burns

Another mechanism to keep TOMB above FTM is buybacks initiated from the DAO Wallet. These are done currently at the discretion of the development team, in secret (to avoid front-running). Although they plan to move to a governance system.

TSHARE

The final token is Tomb Shares which Tomb.Finance describes as “one of the ways to measure the value of the TOMB Protocol and shareholder trust in its ability to maintain TOMB close to peg”.

When staked, stakers are rewarded with newly minted TOMB, distributed proportionally to all shareholders of TSHARE.

In the future, once fully distributed, TSHARE will become a DAO governance token that shareholders will use to vote on changes to the protocol.

DefiLlama.com’s Yield Protocol Rankings by Total Value Locked, across all blockchains¹

Tomb Resurrection

Initially, Tomb.Finance implemented a tax system to prevent early sell pressure by imposing a tax on TOMB sold below peg. An exploit was found that circumvented the tax system, which led the Tomb Team to abandon the system and went to upgrade the smart contracts. Unfortunately, fear, uncertainty, and doubt about the project spread like a virus. This led to TOMB losing peg with FTM and the project fell into hard times. A tax system in crypto? Some say “Tomb dug their own grave” — but others kept faith in the project, they knew that what is dead may never die but rises again harder and stronger.

The project was acquired and revived by Harry Yeh, a Hong Kong/Canadian hedge-fund manager, CTO and software architect. He is also Fantom’s unofficial “hype man”, and is a well-respected member of the Fantom ecosystem. Harry and the new team (who remain mostly anonymous) have grand plans for the protocol.

DefiLlama.com’s Protocols on Fantom by Total Value Locked¹

The Afterlife

The TOMB token will soon have cross-chain compatibility with other ERC20 chains like Binance Smart Chain, Ethereum, and Avalanche. Increasing liquidity and facilitating more accurate pricing data. They also plan on changing the peg ratio to 2 FTM = 1 TOMB, to increase liquidity.

By breaching $300 million USD TVL, Tomb.Finance was eligible, and received, a 1 million FTM grant from the Fantom Foundation. They have used this grant to launch a Fantom Validator node (Node 82), and the remainder has been staked on Geist.Finance to build up the DAO fund.

It is rumoured that Binance Cloud, will launch with FTM and TOMB support. Details are light, but Binance Cloud allows “partners to launch digital asset exchanges”. One could speculate that this would provide Fantom and Fantom tokens with the ability to be traded on a centralized exchange — which also might offer FIAT trading for Fantom tokens.

Today in crypto, investors expect to see utility for their tokens. TOMB will soon become a collateral option on lending platforms like QiDao. This means you will be able to maintain exposure to TOMB, and therefore also FTM, by collateralizing TOMB and borrowing stable coins like USDC, DAI, or MIM.

TOMB will also be used in conjunction with a new, unreleased, “cat” themed utility token, on a platform called FTMPad. FTMPad will be a launchpad/incubator for new projects launching on the Fantom network.

Conclusion

The project’s revival from collapse, the current TVL, future roadmap, utility, and top-tier marketing are all huge signals for me to be bullish on this protocol. In a way, this protocol allows you to maintain exposure to Fantom, and participate in Fantom’s DeFi ecosystem without leverage and the threat of possible liquidation.