There is perhaps no trait that defines humankind as universally and dispassionately as our innate drive to get more out of what we put into something. Viewed through a certain lens, the sum of our species’ contribution to the planet could be defined as a function of our cumulative efforts to turn raw substance and ideas into things that are more valuable to us. At various points in the curve of that function are the invention of hunting tools, the rise of agriculture, the industrial revolution, and towards the far end, the protocol known as Wonderland (TIME).
Like any endeavor that shows remarkable early returns, Wonderland has been called a ponzi scheme. It’s a label that is probably overused in the sense the it often gets casually assigned to any operation that might hint at deceit (Merriam-Webster defines a ponzi scheme is a “swindle in which some early investors are paid off with money put up by later ones in order to encourage more and bigger risks”).
We can say that Wonderland is not a ponzi scheme as confidently as we can trust that its protocol-backed method of generating returns (issued in its native currency TIME) is genuine and transparent.
The mechanics that power Wonderland and control the management of its treasury of TIME are undoubtedly intriguing on paper – in essence, founder Daniele Sestagalli has set out to create a self-sustaining economy with some novel built-in features to mitigate the volatility and harmful speculative practices that plague other projects.
Does the Concept Work?
It may be more useful to frame the question as such: how is Wonderland a better bet than other investments, DAO or otherwise? Ultimately, the success of Wonderland, like every other income-generating scheme, hinges on whether or not it can generate enough incentive for new investors to buy TIME, and for existing investors to keep their TIME.
A key feature of Wonderland’s economy is that every TIME is must be backed by 1 Magic Internet Money (MIM), which is a stablecoin pegged to the US dollar. This means that there is a price floor of TIME – if the value of TIME were to dip below that of 1 MIM, the protocol would automatically start using Treasury funds to buy back TIME until it has regained price parity.
Thanks to this clever piece of monetary policy engineering, stakeholders in the Wonderland economy can count on a uniquely iron-clad failsafe; in a pithy quip from its FAQ page, Wonderland notes that “you can’t trust the Fed, but you can trust the code”.
The idea is not for TIME to ever dip to the price of 1 MIM – that would be an adverse scenario for current investors, given that TIME is still currently trading at about $3,000 USD. The trust inspired by the infallibility of it protocol is what gives TIME its premium – the simple knowledge that the price can never go to zero should, in theory, be enough to keep the price far above its floor.
As far as how much that premium is actually worth, (you knew this was coming), TIME will have to tell.
The protocol may function flawlessly, but what it cannot control is the human behavior governing it’s inputs. Thus far, TIME has been beholden to about as much volatility as any other currencies within the cryptoverse. Skeptics might argue that putting one’s faith in Wonderland is about the same as putting it into DeFI as a whole – it’s worth noting that there hasn’t been any concrete guidance about where Wonderland will choose to invest its fund capital.
The much-touted APY of TIME (currently hovering at ~80,000%) has served well as a hook to bring new investors into Wonderland during its early high-growth stage. If dynamics within Wonderland play out in a best case scenario, steady demand for both minting and staking would maintain significant upward pressure on both the APY and the price of TIME. The two levers can also act as a counterbalance if one flags – for example, if minting can’t keep up pace with staking, the APY would drop and the price of TIME would rise.
One could make the case the Wonderland is uniquely suited for the current era of DeFi, which could be characterized in some respects as a race to amass capital and users.
For all the purported benefits DeFi can bring to society, the engine that drives capital into its ecosystems is powered by return on investment. Wonderland harnesses that engine in an experiment in capitalist minimalism; there’s no product or almost zero operational mass that occupies the space between the issuance of equity and its appreciation – the return is the product.
To understand it’s appeal, you don’t really need to learn anything about Wonderland except the parts that are designed to make your currency balance go up – by a lot. It’s the uncontaminated essence of the ponzi scheme without the trickery, and it might just be ideal for its climate – and for our human nature.