When you buy TOMB anywhere, you temporarily get a rise in price of TOMB that isn’t seen on FTM. This leads to an arbitrage opportunity as I mentioned in this article in the hypothetical of having a TOMB/USDC pair. Arbitrage will take place until the price across all chains reflects the same thing. So, there will always be some level of value distribution back into FTM through arbitrage. My point here is that if you buy TOMB elsewhere, the change in the peg has to also be reflected in FTM/TOMB pair because the FTM/TOMB pair can’t be saying 1:1 if TOMB is worth double that and the only way the FTM/TOMB pair says 2:1 is if there is now twice as much FTM or half as much TOMB in the pool or a more likely scenario which lands somewhere in the middle as a mixture of both. For this reason, I don’t think you’ll see “inflation of exactly the same magnitude” as the potential FTM price appreciation. Admittedly, this is arbitrage, not a direct pouring of the value put into TOMB directly into FTM and only a fraction of this value reaches FTM when distributed. It’s also why I do mention that if TOMB replaces FTM in Liquidity like as you mentioned for the MAI-TOMB LP then yes, you could make the case that it is competing with FTM for value just as stablecoin pairs do. I should amend my article on this point.
Your second paragraph doesn’t make sense to me, do clarify because I think you ask good questions. Your argument is that TOMB holders would be willing to exit as long as they are in profit even if this profit is less than if they had just held FTM instead? This means you expect TOMB holders to be selling under peg. Which they could, in which case, that means they don’t have faith in the peg restoring. Or in other words a loss of faith in the peg.
You also make the argument that People have larger unrealised profits than FTM holders, I assume you’re referring to participants of the Tomb ecosystem farming yield. Take for instance people farming TOMB/FTM LP now on paper they have a lot more potential FTM than initially. Again, are you expecting them to exit their positions when Tomb is under peg? In which case, it’s the same as before where users have lost faith in the peg and exit with less than potential FTM. I also don’t quite understand the point on TOMB:FTM, FTM:USDC and that you only care about the end product TOMB:USDC. Even if you only care about Tomb:USDC. It already includes the peg value. For example, say the Tomb/ftm peg is at 0.9 meaning that TOMB is worth 10% less than FTM, the TOMB:USDC value is also 10% less than the FTM:USDC value. While you could exit here just because you’re in profit, you could earn 10% more if you believe the peg will be restored. Is your point is that you don’t think we need a bank run to see Tomb Finance collapse because of the excess TOMB in the system trying to exit? If that’s your point then I disagree to an extent because if money entering the system exceeds profit-taking then the system holds. The system doesn’t hold if money exiting exceeds money entering which will inevitably happen at some point. Probably happening right now even.
Last paragraph on use cases of TOMB in place of FTM. I do agree. If you use TOMB in place of FTM for example in liquidity pairs (as I did already mention in my article) then yes, you do take away one of FTM’s value propositions. At the moment this does not happen (which is what I mentioned in my article) at least not to a significant extent (as you mentioned the MAI-FTM LP).
I would agree with the point on MATIC and ETH. B̶u̶t̶ ̶f̶u̶n̶n̶i̶l̶y̶ ̶e̶n̶o̶u̶g̶h̶,̶ ̶d̶u̶e̶ ̶t̶o̶ ̶t̶h̶e̶ ̶l̶i̶m̶i̶t̶e̶d̶ ̶p̶a̶i̶r̶s̶ ̶a̶n̶d̶ ̶a̶c̶c̶e̶s̶s̶ ̶t̶o̶ ̶T̶O̶M̶B̶,̶ ̶t̶h̶i̶s̶ ̶a̶c̶t̶u̶a̶l̶l̶y̶ ̶d̶o̶e̶s̶ ̶o̶c̶c̶u̶r̶ ̶i̶f̶ ̶t̶h̶e̶ ̶o̶n̶l̶y̶ ̶w̶a̶y̶ ̶t̶o̶ ̶g̶e̶t̶ ̶T̶O̶M̶B̶ ̶i̶s̶ ̶t̶h̶r̶o̶u̶g̶h̶ ̶t̶h̶i̶s̶ ̶o̶n̶e̶ ̶T̶O̶M̶B̶-̶F̶T̶M̶ ̶p̶o̶o̶l̶.̶ ̶T̶h̶e̶ ̶a̶l̶t̶e̶r̶n̶a̶t̶e̶ ̶p̶a̶t̶h̶w̶a̶y̶s̶ ̶i̶n̶ ̶a̶r̶e̶ ̶w̶h̶a̶t̶ ̶a̶l̶l̶o̶w̶ ̶t̶h̶a̶t̶ ̶v̶a̶l̶u̶e̶ ̶t̶o̶ ̶g̶e̶t̶ ̶a̶r̶b̶i̶t̶r̶a̶g̶e̶d̶ ̶a̶c̶r̶o̶s̶s̶ ̶a̶l̶l̶ ̶t̶h̶e̶ ̶d̶i̶f̶f̶e̶r̶e̶n̶t̶ ̶p̶a̶i̶r̶s̶.̶ ̶T̶h̶i̶s̶ ̶e̶f̶f̶e̶c̶t̶ ̶w̶i̶l̶l̶ ̶d̶e̶c̶r̶e̶a̶s̶e̶ ̶t̶h̶e̶ ̶m̶o̶r̶e̶ ̶p̶a̶i̶r̶s̶ ̶w̶i̶t̶h̶ ̶l̶i̶q̶u̶i̶d̶i̶t̶y̶ ̶t̶h̶e̶r̶e̶ ̶a̶r̶e̶ ̶f̶o̶r̶ ̶v̶a̶l̶u̶e̶ ̶a̶r̶b̶i̶t̶r̶a̶g̶e̶,̶ ̶i̶n̶ ̶f̶a̶c̶t̶,̶ ̶e̶v̶e̶n̶ ̶t̶h̶e̶ ̶o̶n̶e̶ ̶T̶O̶M̶B̶/̶M̶A̶I̶ ̶p̶a̶i̶r̶ ̶w̶o̶u̶l̶d̶ ̶p̶r̶o̶b̶a̶b̶l̶y̶ ̶a̶r̶b̶i̶t̶r̶a̶g̶e̶ ̶a̶w̶a̶y̶ ̶t̶h̶i̶s̶ ̶v̶a̶l̶u̶e̶.̶
Actually, I would argue that the initial purchase of the 1st token will be arbitraged away which is why you don’t see an eventual market buy of 1 token also reflect in price appreciation of the entry token. In a closed system where there are no other pairs to arbitrage, I think you will see this effect. I think of this as like the ICO boom on Ethereum a few years ago where you could only buy the ICO project with ETH which made demand for ETH boom. Today I get it, you could just buy the project with stables instead which arbitrages off a portion of that value into the stables. Just curious why you think this doesn’t work in a closed system?
If you think I’m wrong, feel free to argue back why. I’m always learning too.
