Nacho | Achieving Peg
When Nacho achieves peg, there are lots of ways to bake it.
As Nacho knocks on the door of 1000:1 peg against ETH again, it’s important to understand how this affects the protocol and what actions can be taken. And of course, with feedable, soon-to-be-fightable NFTs in the mix, there are new options to evaluate.
- When peg is > 1.01 we enter an expansion phase
- Stake NSHARE in the Bowl to get NACHO rewards
- Take NACHO rewards, stake in Farms and LPs to receive NSHARE
- Use the Oven to get NBONDs, which have higher value when upgrading NFTs
- Feed NFTs NACHO, NBOND and prepare them for battle to earn tokens
- Take profits along the way
What is peg?
For a seigniorage-based algo-stablecoin, peg is a number that represents the value of the native share token, NACHO, against its peg partner, ETH. We elected to peg NACHO at a ratio of 1000:1 against ETH. A balanced “at peg” state of NACHO’s TWAP (time-weighted average price) is between 1.00 and 1.01, and this means there is neither contraction nor inflation.
Any peg value below 1.00 indicates an oversupply of NACHO relative to the price of ETH, sending the price down and triggering a contraction phase for the protocol where NBONDs become available in exchange for NACHO, to burn and reduce supply. This is normal in small fluctuations.
Any peg value above 1.00 indicates an undersupply of NACHO relative to the price of ETH, increasing the price and triggering an expansion phase for the protocol where staking NSHARE in the Bowl emits new NACHO to increase supply, rewards for liquidity pools increase, and where above-peg NBONDs are available to purchase NACHO at a discount. It is common for the price of NSHARE and NACHO to increase during this time.
The protocol has several mechanisms designed to dynamically adjust the supply of NACHO, pushing its price up or down relative to the price of ETH.
Why has it been so hard to reach peg?
Several other factors including the TVL (total value locked) and liquidity of a project will affect the amount of tokens it requires to achieve peg balance. But it is the actions of the community of holders that have the biggest effect. The explosion of Tomb fork season saw a particularly sharp circuit of behavior that tanked project after project (along with dire market conditions, of course).
When the bulk of holders act with an aim of sustainability, the protocol’s stay above peg extends. This includes taking profits during an expansion phase, but balancing those withdrawals with the re-staking of NACHO and NSHARE rewards back into the protocol.
What Tomb forks have experienced is that during an expansion phase the Bowl becomes known for high daily APRs, sometimes upwards of 10%. This attracts lots of new wallets and participants, some from other Tomb forks. Growth accelerates as newcomers get NACHO, stake in LPs, receive NSHARE rewards, and then stake NSHARE to get more NACHO. The protocol is healthy. What lies underneath, though, is fickle, as liquidity locusts (short-term pump and dumpers) see daily APRs drop to just a few percent per day and liquidate their entire holdings to invest in another Tomb fork. Within no time, there’s a large oversupply and the project drops below peg.
The community, the treasury and newcomers can come to the rescue by exchanging NACHO for NBONDs. But as the locusts continue liquidating, the protocol slides farther down an uphill battle.
Why are we almost back to peg?
With such low liquidity, it requires less input to move the needle. Which is to say, smaller amounts of NACHO make a much bigger difference today than it did 3 months ago.
With the right conditions (cheap NACHO and low liquidity) and timing (quiet summer), the NACHO community has impressively risen to the challenge to climb back to peg.
Simply put, we’re getting back to peg because the OGs are buying back NACHO.
Once we’re at peg, the game changes. Buy some NACHO to help the project get there and reap the rewards at https://nachoxyz.com/
What do I do once we’re at peg?
Nacho isn’t a copy pasta Tomb fork. With a DEX, single-sided staking, compounders, a DeFi-NFT project and spec matches in the works, there are lots of other options for how to take rewards while keeping a health protocol.
Let’s get started. We’ll unpack this diagram and all its avenues in sequence. The best place to get into this is in Discord, where the incredible Nacho community will unpack and debate what the best play is from one day to the next.
1. The Bowl
When the NACHO’s TWAP (time-weighted average price) is 1.01 or greater, we are in an expansion phase. Staking NSHARE in the Bowl will earn rewards of NACHO in 6-hour phases, called Epochs.
Any interaction with the Bowl will reset the timers. That’s three epochs (18 hours) to withdraw your NACHO rewards, and six epochs to unstake your NSHARES (36 hours).
What to do
• Stake NSHARE to receive NACHO rewards
• Claim NACHO rewards
• Continue to stake NSHARE rewards that were earned elsewhere
2. The Farms & LPs
When you’ve received NACHO rewards from the Bowl, there are a few options within the farms and LPs. Many wizards recommend a balanced approach to the various options here.
i. Single-sided Staking
By staking your NACHO in the Nacho Farm, you will earn NSHARE. Keep an eye on the APRs here.
ii. NACHO-wETH LP
By pairing your earned NACHO tokens with new wETH on NachoSwap, and then staking it in the NACHO-wETH LP, you will earn NSHARE. Selling NACHO for wETH in this pairing will reduce the value of NACHO, so it is recommended to use new wETH.
iii. NSHARE-MATIC LP
By pairing your earned NSHARE (from i. and ii.) tokens with new MATIC on NachoSwap, and then staking it in the NSHARE-MATIC LP, you will earn more NSHARE (this is an alternative to staking all NSHARE in the Bowl). Selling NACHO for MATIC in this pairing will reduce the value of NACHO, so it is recommended to use new MATIC.
iv. Take Profits
Always take profits along the way by withdrawing 10–20% of your NACHO and NSHARE rewards (although many would advise to sell NSHARE cautiously). Take too little and you’ll leave yourself at risk during down times. Take too much and you begin to hurt the protocol’s longevity. When a community of holders acts in tandem, it’s unbelievable.
What to do
• Take your NACHO rewards from the Bowl
• Deposit NACHO in the Nacho Farm single-sided staking, earn NSHARE
• Pair NACHO with wETH on NachoSwap, stake in the LP, earn NSHARE
• Stake newly earned NSHARE in the Bowl
• Pair newly earned NSHARE with MATIC on NachoSwap, stake in the LP, earn NSHARE
• Take 10–20% profits
3. The Oven
The Oven can’t be mentioned for an above-peg scenario alone, as it has essential functions for both above-peg and below-peg scenarios. For a full understanding of NBONDs, read our docs. During phases where TWAP pushes just above and below 1.00–1.01 on a regular basis, which is very healthy, there are a few key actions.
v. Above-peg Bonds
Exchange wETH for NBONDs when available. They are linearly vested for 3 days before they can be claimed. Once claimed as NBONDs, you can redeem them for NACHO or feed them to your NFT Luchador at the Gym to receive a 4x value over NACHO.
vi. Below-peg Bonds
Exchange NACHO for NBONDs when available, which burns NACHO to decrease supply and help adjust the price. With your NBONDs, you can redeem them for NACHO once we are above-peg only. During the contraction phase, you can feed them to your Luchador NFT at the Gym to receive a 4x value over NACHO.
What to do
• Exchange NACHO for NBOND when below peg
• Exchange wETH for NBOND when above peg
• Redeem NBOND or feed NBOND to NFTs
This is where things get really interesting. To fully understand how feeding and growing Luchador NFTs work, read this Medium article. Luchador NFTs are upgradeable NFTs—you upgrade them to increase your chances of winning fights for tokens.
Feeding a Luchador NACHO or NBOND increases its weight (measured in KGs) by 1x and 4x respectively. With more weight, your Luchador trains harder and faster at the Gym, increasing his speed, strength, stamina, style or health. These five skills contribute to his LVL (level), essential to the outcomes of battle for tokens.
vii. Grow a Luchador
Mint a new Luchador here or buy one on the open market. Once he’s been purchased, feed him NACHO earned from NSHARE staking or NBOND swaps at the Gym. Then unlock and upgrade the skill gyms using NACHO to train the different skills. Upgraded gyms train the Luchador faster and have an increased capacity to train more Luchadors at the same time.
viii. Fight a Luchador (coming soon)
There will be a few ways to put your trained Luchador in the ring to earn. First, Spec Matches will be released, offering competitors the opportunity to wager NACHO against another NFT-holding opponent for the chance to win NBOND (and possibly NSHARE), grouped by weight class. The higher your LVL and skills, the more likely you will be to win. Competitors will also be able to practice against the house, fighting a House Bully NFT. Spectators can wager on matches as well. Following Spec Matches, there will be a live 3D fighting game where competitors will battle NFT vs NFT.
What to do
• Use wETH to mint new upgradeable NFTs
• Use NBOND to feed Luchadors
• Use NACHO to unlock and upgrade Gyms
• When ready, battle NFTs to win NBOND (and maybe NSHARE) to cycle back into your system
• NBOND is redeemed for NACHO to cycle back up, or fed to Luchadors
• NSHARE is cycled back into the Bowl, LPs, and profit
A little information overload?
The first order of business is getting to peg. Buying NACHO gets us there.
Following that, things will move quickly but the process and cycles take time, tinkering, moving things around. There’s no better place to evaluate the options than in Discord with the support of experienced, protocol-prioritizing community members.