There's a audio version of this blog post, hosted on YouTube:
The market seems pretty excited by the Token Generation Event that is due to occur on Wednesday. The Venice Token has rallied, it is up 32% from 7 days ago. I guess some people are buying the token pre-hype hoping to make a quick buck by selling again just before the event. Others are buying VVV as a gateway to minting DIEM. Some might be buying because the inflation rate of the Venice Token will be dropping, which improves the tokenomics. Others might be buying because a large amount of VVV will be locked up as DIEM is minted and the reduction in supply could be bullish.
Myself, I don’t know what will happen and I don’t know if it’ll turn out to be a “buy the rumour, sell the news” situation. I’m not a trader. My strategy is to buy a bit of Venice Token every day no matter the news, no matter how I’m feeling, no matter whether the token is down or up. I’m keeping it simple: DCA and HODL.
I have been trying to digest the mechanism the Venice team has come up with for minting the DIEM token. I did have some concerns initially but I’m coming round now.
My first concern was the loss of simplicity. We’ll now have 2 tokens in our ecosystem not 1. Having said this, for DIEM, it’s going to be easier to explain its purpose to an outsider. DIEM is $1 per day of private uncensored access to AI. That’s nice and easy - far easier than trying to explain the utility of $VVV today; which doesn’t provide consistent access to AI. As for the new utility of $VVV… explaining it… not so much. As far as I can gather, VVV becomes a mechanism for keeping the price of DIEM within a reasonable range. I’m buying it because it’s a future call option on DIEM. No actually that’s not accurate, but it sounds better than “VVV is collateral that lets me mint DIEM”. I’ll have to work on my elevator pitch for VVV as I get a grip on it.
Another concern I had when I first heard about DIEM is that I was worried it would be an internal Vampire attack on the price of VVV. I was worried that the entire Venice ecosystem will be roughly the same value, but split into 2 tokens meaning any value accruing to DIEM would need to come out of the value of VVV. Having thought about it more though, I’m happier now. There’s no arbitrage forcing VVV down (at least whilst DIEM is less than the mint-parity value). In fact, lots of VVV is going to be removed from the circulating supply because it needs to be locked to mint DIEM AND for buyers of DIEM, they need to first buy VVV because the only way to acquire DIEM initially, is via the VVV-DIEM liquidity pool that the Venice team is seeding. It’s worth saying that again. If you're not a VVV minter, then to acquire DIEM, you need to buy VVV first. Of course most routers (i.e. exchanges) will abstract that away from you. You’ll pay ETH or USDC and get DIEM. But under the hood, you’ll be buying VVV, then selling VVV into the liquidity pool owned by Venice to get DIEM. And we don’t need to worry about any VVV that the Venice team controls. They are a friendly whale. The friendly whale.
It’s going to be interesting to see what happens. Super Exciting! It’s like the super-bowl albeit for a super niche community.
I mentioned “mint-parity”. Perhaps I should explain what I mean. Mint-parity is (VVV price) × (mint rate). If VVV were $4 and the first public mint rate is 93 VVV per DIEM, then parity is about $372. When DIEM trades way below that, I would expect rather than minting, most folk would just buy from the pool; when DIEM trades near/above the mint-parity price, then minters will appear, and they would be incentivized to sell their minted DIEM, which puts downwards price pressure on DIEM and upward price pressure on VVV. It’s a fascinating balancing dynamic.
My plan hasn’t changed. I’m going to DCA into VVV and stake it. I don’t need DIEM at the moment. One day I will, and I’m happy to know that being a holder of VVV ensures DIEM is waiting for me. I’m not going to put up real money to speculate on the price of DIEM But… just for fun my guess at the value of DIEM after the volatility settles is:
- If it’s under $100 it’s great value.
- If it’s between $100-$300 it is good value.
- If it’s between $300-$400 it is fair value.
- If it’s between $400-$500 is expensive.
- If it’s over >$500 it is over-priced.
I got these figures because the software I run for my day job does 10,000 AI API requests per day, so I roughly know how much it costs and how much I’d pay to have that API access in perpetuity.