Summary
Bitcoin and Ethereum ETFs experienced a downturn in the second quarter of this year, and many analysts and investors took this opportunity to start to study the fundamentals of projects and tokens in depth. This report found that the following themes have become industry consensus:
Many VC-backed projects launched tokens with initial FDVs exceeding $5 billion, leaving little room for returns for retail investors and token liquidity funds;
The industrys overinvestment in infrastructure has led to an oversupply of block space, but relatively few applications with mass adoption capabilities. Over the past four years, new projects have emerged in an endless stream, but the Ethereum network gas fee has repeatedly hit new lows;
The market has become more sensitive to token vesting plans, token inflation rates, and large token unlocking by teams and private investors. Many low circulation, high FDV projects have difficulty outperforming mainstream coins such as BTC and SOL, as well as fairly issued meme coins such as WIF and PEPE;
As the market momentum and enthusiasm fade, the remaining participants are more focused on projects with good fundamentals, strong token utility, and protocols that empower tokens.
As a core component of the ecosystem, WOO has long been committed to improving the fundamentals of the WOO token. Over the past year, WOO has improved the utility of the WOO token on WOO X Global through product upgrades such as liquidity mining. It plans to launch copy trading in the third quarter and will further improve the staking program. Currently, WOOFi and WOOFi Pro have significantly improved the fundamentals of the WOO token by giving back USDC to WOOFi stakers. In the second half of 2024, WOO plans to give back to stakers by launching new products and deploying their applications in the new ecosystem to further expand its DeFi market share.
This report will discuss a series of WOO initiatives in the second half of 2024 to further strengthen the fundamentals of the WOO token and highlight the achievements of the WOO brand flagship product.
Improved WOO token economics
Over the past four years, the WOO token has been a core component of the WOO ecosystem, playing an important role in coordinating the interests of early investors and team members, building communities, and establishing partnerships with industry-leading projects. As the project matures, the role of the WOO token in the ecosystem is also evolving. In the third quarter of this year, WOO will establish a corresponding holding company and foundation entity structure, and the WOO token will also be transferred to these entities. Its long-term goal is to develop WOO X Global into a first-class centralized exchange and build WOOFi into a global leading DeFi application suite.
In addition, WOO plans to improve the Designated Market Maker (DMM) program on WOO X by transitioning to a hybrid incentive program that combines WOO tokens and stablecoins. In early 2024, WOO completed a strategic round of financing supported by a large number of DMMs, and since receiving WOO token incentives from the DMM program in August last year, WOO has also reduced the issuance of tokens by introducing stablecoin incentives. Currently, WOOs annual issuance rate will be reduced by more than 1%, while still keeping DMM consistent with the WOO ecosystem.
One of the core drivers of WOO token’s strong fundamentals is the WOOFi and WOOFi Pro trading products that provide WOOFi stakers with USDC yield or automatic recurring growth. Building on the exponential growth achieved by WOOFi Pro in Q2, WOO plans to further strengthen fundamentals by releasing several innovative product improvements in Q3. Overall, these product improvements will drive further growth in WOOFi adoption and increased market share, resulting in higher returns for WOOFi stakers.
To further incentivize WOOFi stakers to enable WOOFis automatic looping growth feature, WOO is launching a Match and Burn campaign, where the ecosystem rewards will match the same amount of monthly WOOFi buybacks and destroy those tokens from its treasury. This move will encourage more WOOFi stakers to enable the automatic looping growth feature, increase the ongoing demand for WOO tokens, and gradually reduce the total supply of WOO tokens while increasing the market value to FDV ratio.
As of the end of Q2, approximately 291 million WOO tokens were staked on WOO X Global and 275 million WOO tokens were staked on WOOFi. This is a 14% increase from the previous quarter and accounts for 32% of the circulating supply. Through continued product innovation, new sources of utility, and growing market share, WOOs staking growth momentum is expected to continue into Q3 and beyond.
As the WOO token continues to mature, the vesting plan for early teams and investors will expire in the fourth quarter of 2024. After the holding company is established, WOO will mainly supplement future team incentives through equity option plans (ESOPs) rather than just using tokens to reduce future token issuance. At the same time, WOOs improved DMM plan will also significantly reduce the issuance rate in 2025. It is predicted that the total supply of WOO will decrease by nearly 65%, and the annualized issuance rate for the whole year of 2025 is expected to be about 4.4%. At that time, WOOs annualized issuance rate will be one of the lowest in the industry, almost on par with BTC, ETH, and Solana.
WOO Token Inflation Chart
WOO inflation is expected to drop to 4.4% by early 2025, and WOO is expected to continue to strengthen in the third quarter through the reduction of total supply through the matching and destruction mechanism, automatic buyback of the WOOFi protocol, and the additional value capture mechanism introduced through WOO X Global.
WOOFi: Becoming the industrys leading DEX
WOOFi Pro had a strong momentum in the second quarter, and it has always held a market share of about 5% among many similar competitors. WOOFi Pros total transaction volume reached 238.3 billion US dollars (an increase of 3.74 times from the first quarter), gross fees reached 2.48 million US dollars (an increase of 3.95 times from the first quarter), and the cumulative transaction volume has now reached 34 billion US dollars, with about 23 million daily active users.
So, why has WOOFi achieved such great success in such a short period of time? There are four reasons:
There is a high demand for Orderly Merits among users;
WOO trading terminal cooperates with Mizar, CCXT and other platforms to improve trading efficiency;
Actively expand the promotion incentive program: the program accounted for about 72% of the transaction volume in the second quarter, while the figure was almost zero in the first quarter;
The number of users in East Asia continues to grow, with Japan becoming the country with the largest number of WOOFi 90-day active users.
Due to the surge in WOOFi Pro trading volume, the staked volume of WOOFi Stake has also increased accordingly, with fees paid to stakers being $1.47 million (1.36 times more than in the first quarter), not including the additional airdrops of 7.5 million FLC and 97,982 ZRO this quarter. As of this writing, nearly 275 million WOO tokens are staked on WOOFi (an increase of 65.9 million from the first quarter), of which 40% are on Arbitrum, 31% on the Ethereum mainnet, and Avalanche ranks third with a share of 14%.
At the beginning of the second quarter, WOOFi Swaps exchange volume was lower than WOOFi Pros trading volume, but after the WOOFi Swap V2 contract upgrade and reintegration with the aggregator, the exchange volume gradually increased. WOOFi has recently returned to the top 15 DEX rankings in 7-day trading volume. Overall, the total exchange volume in the second quarter was US$1.066 billion, with Arbitrum (32.2%), Optimism (19.6%), Polygon (15%) and Base (14.8%) as the main ones.
In the second quarter, WOOFi also conducted two comprehensive audits through Zellic and Sherlock, and integrated with Hypernatives risk detection system, and its security was further strengthened. In addition, WOOFi also received 395,000 ARB rewards, which began to be distributed on June 16.
Ben Yorke, Vice President of Ecosystem, said:
“The next steps for WOOFi’s strategy will significantly expand the reach of our initial sPMM exchange by deploying and enhancing product functionality on multiple networks to enable further growth. The introduction of additional networks, including the first non-EVM network, provides us with a unique opportunity to engage with new user groups while further solidifying the fundamental strength of the WOO token through increased fee income.”
Make WOO X a leading CEX
In the second quarter, WOO X made significant progress in product launches, infrastructure improvements, and liquidity enhancements.
First, the WOO X Global product team launched several innovative index perpetual contract products in the second quarter in cooperation with index provider GMCI and major liquidity provider Wintermute. The new products have not only been adopted by many users, but also attracted widespread attention from Web3 media such as CoinDesk and The Block. It has a wide range of uses, such as going long on meme coin indexes to hedge short on BTC, a basket of large-cap assets or other currencies.
In terms of returns, WOO X Global launched two products in the second quarter. For users with lower risk and long-term orientation, WOO X Global is the worlds first CEX to cooperate with OpenTrade to provide direct access to US Treasury bonds. At the same time, in order to meet the needs of users with high-risk investment preferences, WOO X Global also launched multiple liquidity mining products, providing more than 100% return rate for WOO tokens. It is expected that WOO will launch more similar features in the second half of the year.
The diversification of WOO X liquidity providers is also continuing to expand. Specifically, WOO X has expanded the DMM program to stablecoin incentives to enhance top depth, thereby improving the liquidity of BTC and ETH perpetual contract pairs. This has enabled WOO X Global to surpass many first-tier exchanges in perpetual contract liquidity and become an important driver of user growth in the second quarter. The figure below shows the expected slippage for each $100,000 transaction in BTC-PERP and ETH-PERP transactions during Q2. Overall, these improvements have significantly reduced slippage by about 75%.
Currently, the DMM program still attracts a diverse group of participants, with 80-85% of the market making volume for perpetual contracts covered by DMMs. Notably, Wintermute has maintained its position as the top DMM in all perpetual contract markets. Since the launch of the spot DMM program at the end of the first quarter, DMMs have accounted for about 40% of market maker volume, and are expected to continue to grow in the second half of 2024. In addition, many new token market makers (TMMs, professional service providers for specific token issuers) have also connected with WOO X, and WOO X Global will be able to more easily and quickly deploy new listing projects.
Bryan Huang, Chief Product Officer at WOO, said: “In Q2, we began exploring more trading tools to improve execution management and trade discovery, which will be the focus of the next quarter. We will introduce strong Lead Traders (LTs) to ensure the success of our copy trading product, the most important product launch since the launch of perpetual contracts. Both initiatives will help develop a more active trading community and drive new user growth and retention.”
In addition, Websocket API latency decreased by nearly 90% on average in the second quarter, further promoting the adoption of WOO X Global by high-frequency traders and institutional liquidity providers, driving more trading volume growth. In terms of the graphical user interface (GUI), WOO has also made a series of optimizations to the workspace, including optimizing the layout of the market page, updating the navigation bar, and improving the account and deposit pages.
Building a world-class team
In view of the improvements in user experience, fluidity and performance, WOO is also continuously hiring top talents with many years of industry experience and expanding the team.
Throughout the second quarter, WOO made a total of 42 new hires. According to CoinGeckos Q1 2024 Crypto Industry Report, the average job tenure in the crypto field, especially in crypto exchanges, is usually between 1 and 2 years. In comparison, nearly 50% of employees have worked at WOO for more than two years, and nearly 30% for more than three years, reflecting that WOO attaches great importance to talent training.
WOO COO Willy Chuang said: Our ongoing commitment to talent development ensures WOO maintains its growth trajectory in the cryptocurrency space and drives continued innovation. A key focus in Q3 will be the recruitment of more than 50 new team members with experience in DeFi application and crypto exchange growth, especially in key regions such as Singapore and Western Europe.
Disclaimer and Important Information
This report outlines WOOs key achievements, developments and performance over the past quarter. It is intended for informational and educational purposes only and should not be construed as investment advice, an offer or solicitation of products or services.
Investment decisions should be made with caution. This content is not tailored to individual investment needs or circumstances. We strongly recommend consulting a professional financial advisor before making any investment decision. The views and opinions expressed in this report belong to WOO and do not represent any official policy or position.
Although we strive to ensure the accuracy and reliability of the information provided, WOO does not guarantee its completeness or precision. The content of this report has been translated into multiple languages and disseminated on multiple platforms. Although we strive to ensure accurate translation, differences or inconsistencies may occur. In such cases, the English version on our official website shall prevail.
Any forward-looking statements in this report are based on current expectations and projections about future events. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those anticipated. WOO assumes no obligation to update these statements in light of new information or future events.
This report is not intended for distribution in any jurisdiction where such distribution would be contrary to local law or regulation.
Crypto assets and their trading involve significant risks and are not suitable for most ordinary investors. Crypto asset values may fluctuate extremely, and you should carefully consider your investment objectives, level of experience, and risk tolerance before participating in any crypto asset-related transactions. We strongly recommend that you seek independent advice from qualified professionals before making any cryptocurrency-related decisions. We will not be liable under any circumstances for any loss or damage arising directly or indirectly from the use of or reliance on the information contained in this article.
If you have any questions or need clarification on the content of this report, please feel free to contact us.
July 2024
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