With the absolutely phenomenal returns we’ve seen from the first leg of The Path, we are excited to announce our next short term investment.
We will be looking for another (conservative) 5x return on this token over a period of one to six weeks depending on the price action after launch.
The token we invested in over the weekend has already massively exceeded our expectations – by miles!
As always, the high-risk nature of these investments is the reason that there is potential for such high reward. That said, our capital allocation on this investment is an amount we feel comfortable losing.
Please note that we do not provide financial advice, we are sharing the fundamental research we’ve done and our thought process – this does not constitute a call to action nor should be considered so under any circumstance.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.
Introduction
When we think of content delivery networks (CDNs), we think of YouTube, Twitch, Twitter, Facebook and other similar platforms. All of these networks are owned and controlled by centralised organisations.
Since it is often (but not always) the company that is liable for any content produced on their CDN, it is their right and responsibility to censor content that they do not deem to be acceptable to their rules and/or government regulation.
Even when it is not the responsibility of the company to monitor and remove content posted by users on their website, it can be detrimental to the image of the company to allow controversial content to make headlines as this directly affects the reputation of the CDN. This can be the case even if they are not at fault.
The best example of this in recent times is the permanent banning of Donald Trump from Twitter. Politics aside, if Twitter is able to ban whoever they want, whenever they want, then they could theoretically ban people like the Dalai Lama for whatever reason they decide is appropriate.
Decentralisation of power can help in solving that issue – enter Media Network.
Owing to the efficiency of the Solana blockchain, Media Network is a use case that goes beyond purely financial transactions. It is also a censorship-resistant, decentralised, content delivery network.
Media Network
Media Network is a new protocol built on Solana that is a completely decentralised, self-governed and open-source bandwidth market. It allows media platforms to ‘rent’ bandwidth from the network for any amount of time, and as it is required.
It also allows anyone to utilise spare bandwidth resources and generate an income. Media Network does so by contributing that bandwidth towards supporting the operation of the network, and offering rewards in MEDIA tokens.
MEDIA Protocol Token (MEDIA)
The MEDIA token is the governance token of the Media Network. It is used for managing operations, rewarding bandwidth contributors, and providing the collateral required for interacting with the marketplace; similar to Proof-of-Stake.
Here is how it works:
In order to provide bandwidth and/or utilise the bandwidth offered by Media, users must stake MEDIA tokens through a designated Serum DEX pool.
As a bandwidth provider, the amount of bandwidth they are eligible to contribute is proportional to staked MEDIA – and therefore proportional to the amount of rewards shared amongst providers.
As a bandwidth user, the amount of bandwidth eligible for use is also proportional to the staked MEDIA; however higher bandwidth usage results in proportionally higher fees. Since fees are automatically taken from the stake and distributed to bandwidth providers, the bandwidth allocation for the end user is also reduced as they pay fees and their stake is reduced.
All of these dynamics lock up tokens in the short/midterm, contributing to the reduction of circulating supply and increasing the value of the remaining ‘float’. As this is a short-term investment for us, we do not have to worry about emissions and lockups too much. We are purely looking to capitalise on the hype built up around the launch. From a value accrual perspective too, MEDIA doesn’t fit a long-term investment in our eyes but worth a shot for short-term hype.
Token Launch
Since MEDIA will be the first token launch on Raydium’s AcceleRaytor Launchpad, the FOMO surrounding the launch is our main focus for this investment. As with the STEP token IDO, it is not the core fundamentals of the protocol that drives the price up as high as it does. Never underestimate the power of hype.
In terms of timing, the Public Raise is set for Thursday April 29th, 2021 at 2 p.m. BST (not GMT). The pools will be open for 12 hours until 2 a.m. on Friday April 30th.
The set token price for the launch will be $10 per MEDIA. Since the total supply is 10,000,000 MEDIA, this suggests a Fully Diluted Valuation (FDV) of $100,000,000. The FDV is the Market Cap once the maximum number of tokens have been issued.
The figure below shows the token allocation in more detail:
The initial offering will consist of 150,000 tokens which will be released in two different parts:
The Public Raise on AcceleRaytor
The IDO on Raydium
This means only 1.5% (150,000/10,000,000) of the total supply will circulate at launch which can help in boosting prices as most focus on the market cap (circulating supply * price) and not the FDV (max supply * price).
AcceleRaytor Public Raise
The Public Raise will consist of 100,000 MEDIA tokens, unlocked at 1% of the total supply, with 50,000 tokens going to a RAY Pool and 50,000 going to the community pool.
RAY Pool
Users must have a minimum of 20 RAY staked in RAY single-sided staking for at least seven days starting from April 22nd 2021. The minimum allocation for this pool is 50 USDC and the maximum is 600 USDC. Additionally, RAY Pool participants are able to allocate capital into the Community Pool.
Community Pool
All users can participate in the Community Pool which has a minimum allocation of 50 USDC and a maximum of 450 USDC. If a participant meets the eligibility requirements for the RAY Pool, they can effectively double their maximum allocation by participating in both pools.
We will only be participating in the community pool as we only recently staked RAY (will help in the future). However we speculate the pools will be heavily oversubscribed and the number of tokens to be received will be lower than most would think. Why? Anyone can create 100 wallets and try participating in the Community Pool sale, that makes oversubcription highly likely and hence most people ending up with only a handful of tokens instead of the projected 45 (upper end). More explained 👇
Guaranteed Proportional Fixed Price Model (GPFP Model)
For the Public Raise the Guaranteed Proportional Fixed Price (GPFP) Model will be used to ensure fair allocation across both pools. Participants will be able to deposit any amount between the minimum and maximum allocations as outlined above. It is inevitable that these pools will be oversubscribed. Therefore, it is likely that the total amount of capital raised will be far greater than the set raise amount ($500,000 for each pool).
If this is the case, the allocation for each participant will be calculated in proportion to their contribution compared to the overall raise amount. Here is a simple example to explain this mechanism:
Sam deposits the maximum allocation of 600 USDC into the RAY Pool.
Total contributions made into the pool after it closes equate to $2,000,000.
Since the pool is oversubscribed by $1,500,000, Sam will only receive 0.03% of the 50,000 tokens in the pool (15 tokens, purchased for 150 USDC).
The remaining, unused 450 USDC of Sam’s allocation will be returned to him the moment he claims his tokens.
The same process is true for the Community Pool. In this case, replace the 600 USDC with 450 USDC in the calculation to find the theoretical allocation for that pool.
Unlike the STEP token launch and the MEDIA IDO on Raydium, none of the pools for Media are time sensitive. This means investors in those pools will get a “fair” allocation though it will likely not be a large one as explained in the previous section.
MEDIA IDO on Raydium
There will be an additional 50,000 MEDIA available for trading in the IDO Liquidity Pool. The IDO is set for Friday April the 30th at 2 p.m. BST. This is approximately 12 hours after the RAY and Community Pools close.
Here is what happens on that day:
Raydium will launch a MEDIA-USDC Liquidity Pool.
Participants in the AcceleRaytor raise pools outlined above will be able to claim their token allocation as soon as the MEDIA-USDC pool is launched.
Users will be able to add liquidity and stake LP tokens to earn yield paid in MEDIA tokens. Reward emissions will begin 30 minutes after the launch of the MEDIA-USDC pool and will be released as a Fusion pool.
Similar to the STEP pool, we expect the Annual Percentage Yield (APY) on the MEDIA pool is expected to be substantial for the first few days, this can decrease the circulating supply even further. We haven’t decided if we will be participating in the Fusion Pool yet.
IDO can be thought of as fair because the same rules apply to everyone. For example, there are no restrictions on bot usage, so in theory it is fair rules but some people will get themselves an advantage by using better equipment. On that note, given the success of the STEP IDO, we suspect there will be a lot more bots in this listing which may cause crazy spikes. For that reason we are limiting the amount of capital we’ll be investing.
Yes, we have a set amount of capital dedicated to Solana-based DeFi which we are fully willing to lose but out of that we are only risking 10% on MEDIA.
Valuation
When putting a target price on a token we always try to compare it to similar projects already established on other chains. There aren’t similar projects in the space with enough presence but there have been other IDOs across multiple chains and valuations ranging between $20M and $25M in MCap are common.
Considering the massive volume of onboarding we saw for the STEP token, we think that our $2.50 estimation was an under-shoot to say the least. It is often difficult to put a price target on a token listing. Consequently, it is always a good idea to be conservative when trying to put value on a new token from launch.
We’re taking the middle ground at $22.5M in MCap.
With this in mind, let’s have a look at what we know:
We know that the token will have an initial value of $10 per token and 150,000 tokens will be circulating at the time of the IDO launch. This gives us an implied market cap of $1,500,000.
We know from experience that as soon as the IDO goes live, the volatility tends to be immediate and violent to the upside. For instance, bots can undercut traders and everyone tries to get orders filled.
Taking this into account, and the fact that there are only 150,000 tokens available (100,000 of which are already in the hands of investors from the AcceleRaytor pools), we believe that an entry price of $30 is achievable.
Assuming the volume that we saw on the STEP token over the 48 hours after launch is a good indicator of what will likely happen with MEDIA, we think that it is likely that we see the price reach the mid $100s over the course of the day. (Speculation only)
At $150 per token, this would be equal to a $22.5million market cap – a market cap we consider very reasonable considering the Solana hype and what we have seen from STEP.
TLDR; a $30 entry price and a $150 target, we believe that this is another 5x opportunity.
Note: The entry price is an unknown variable that one cannot anticipate. Hence: Risk Management.
Interacting with Solana
We have already covered how to set up a Solana wallet in the STEP report here, and how to use it to connect to most Solana protocols. The main points that we feel would help users with regards to Sollet are:
Ensure there is enough SOL in the wallet to cover transaction fees. This does not have to be a huge amount as fees are only a few cents; $5 worth is plenty.
If a user does not allow Sollet to automatically approve transactions when unlocking it on Raydium, they will need to approve the transactions on the second window manually.
It is impossible to send or receive USDC from Binance, only SOL is possible through it. We personally use FTX which allows us to send USDC as an SPL token (native to Solana).
Conclusion
As always, we would point out that nothing is certain in the world of finance. Risk management is one of the most important aspects of investing. For this reason, we are keeping our capital allocation on this investment to what we can afford to lose without a second thought.
Disclaimer: NOT FINANCIAL NOR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.