Can you COPE?

As many are aware the market is seeing increased interest and development in the Solana ecosystem. In lieu of the upcoming hackathon submission deadlines and demonstrations and the performance of the SOL ecosystem tokens, year to date. During the past month we have had extremely successful releases as part of The Journey, with those projects also in the SOL ecosystem. However, they were a ‘buy the hype’ scenario with a short timeline and immediately outperformed expectations. Opposed to the aforementioned projects, another SOL based token, COPE, is the focus of our report.

The present research report aims to introduce COPE, starting with the use case and inspiration behind the creation of the protocol. Subsequently, the development timeline to date is covered, before delving into the intricacies of the project and explaining the three core features of COPE as well as their implementation and functionality:

  1. The Leaderboard
  2. The Index
  3. The Trading Pools

Project tokenomics are then reviewed, and the circulating supply on the open market is estimated. The developer teams’ experience and activity along with the current level of adoption is covered, before concluding by observing the projects upside, risks and potential pitfalls. Due to the complexity of COPE a brief summary of the research report is provided.

Disclaimer: THIS IS NOT FINANCIAL OR INVESTMENT ADVICE. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

Simple Summary

COPE aims to create a leader board for all traders who express an opinion via twitter, assigning each trader a numerical score between [0 – 1000] based on their call accuracy which is evaluated using COPE’s own custom metric function. Once the COPE leader board has been populated, the top traders will create an index consisting of 20 tokens which they have selected. Users will be able to invest with the use of smart contracts in the COPE index via on chain Serum DEX order books, with profits in USDC being auto harvested every 48 hours. In similar fashion, COPE trading pools will allow users to follow traders calls and will effectively be an automated copy trader. COPE also aims to offer users insight into their own or other traders trading performance/history via individualised COPE reports which can be unlocked by burning COPE. There are currently 16.5 million COPE tokens in circulation, with over 90% of these being owned by the community. An airdrop of 2000 COPE to 5000 wallets (total 10 million COPE, 60% of circulating supply) was used to seed the initial community. COPE is also currently trading on both FTX (million USD average daily volume) and the Serum DEX, with a liquidity pool also available on Raydium for COPE holders to provide liquidity to the pool, receiving yield in return. By 2025 there are expected to be 21million COPE tokens in circulation. COPE is currently burnt to use the bulk SPL token distributor (developed by the team and used successfully by other projects such as FTR, FROG, SAKITA, WOOF, FAB, BOP and DGEN for airdrops to wallets holding COPE), and in the future will also be used to unlock COPE reports, fees from the use of COPE index and trading pools, DEX analytics and merchandise. COPEs’ lead developer can be found on Twitter (@cyrii_MM), and progress since the 26th of March 2021 has been rapid. The team has extensive experience, stemming from their work on the institutional grade crypto data platform, APEX:E3. Their skills were recently displayed with the rapid building, testing and deployment of the bulk SPL token distributor. The team is in the upper echelon of developer teams working on the Solana ecosystem, offering COPE a significant competitive advantage compared to other projects, with COPE also winning the community choice prize in the previous hackathon. Additionally, for COPE to be trading on FTX and also used as collateral indicates that the team at FTX has done their due diligence. Since the start of June, an unplanned addition in the form of COPE games is near release, where Sollet Wallet and the Unity Game Engine have been integrated. This allows for players to connect their wallet and earn rewards in game which are delivered to their wallet. The upside, risks and potential pitfalls of COPE can be found in the last section of the report.

Detailed Report

As crypto becomes more widely known, people are using a wide variety of channels to keep up to date with news and market development. Outside of just keeping up to date, most users participating in crypto markets are involved in some form of trading/price action. In turn, this has created a huge audience on Twitter of people following accounts releasing trades/calls/market predictions. Additionally, exchange owners (@SBF_Alameda, @cz_binance), founders of coins (@VitalikButerin, @aeyakovenko) and hedge fund managers (@zhusu, @mattysino) actively use Twitter themselves and offer a level of insight into the markets/developments which is not the norm in traditional finance. Due to the combination of the above two factors, Twitter has become the platform of choice for users seeking ‘alpha’ referring to early market insights or generally any valuable information. For anyone with doubts regarding the power of Twitter, or for that case any social media platform, refer to Dogecoins hype and Elon Musk tweet fuelled performance from the start of the year, as well as the Gamestop saga earlier this year.

Touching on Twitter is necessary, especially in the context of COPE, whose whole premise and inception is based on the use of Twitter for market predictions. COPE lead developer is the Twitter user @cyrii_MM, with public announcement of development and creation of the discord server on the 26th of March 2021. It is important to mention the start date of the project as it serves to highlight how talented and capable the development team of COPE are. The progress being made has been rapid:

This is important when evaluating new projects. With Solana season coming, many new projects will be undertaken as hackathon entries before development/motivation/interest fizzles out on them. Many teams may aim to capitalise on the hype around new projects built on the Solana blockchain, leading to unnecessary token releases (i.e. the project does not necessitate the creation of a token) or releases before the project is in a fit state for a token release. Most releases of tokens from such projects are carried out with a tiny amount of the full supply being available on the market to increase demand with a reduced supply, leading to unfeasible short-term valuations of the tokens as a buying frenzy sets on. Further discussion of initial coin offerings or releases and any signals that can be derived from them fall outside the scope of this report. They are relevant however as COPE has gone down an alternative route, with 2000 COPE being airdropped to discord members and early supporters. This effectively seeded an initial user base and increased engagement and interest with the project, whilst also being the first Solana based project to carry out an airdrop.

Whitepaper Breakdown

Their whitepaper lays out a brief and succinct vision for COPE, outlining two key phases for the project. Phase 1 will aim to create a ranking of traders based on their calls via linked twitter account which will be updated on a monthly basis and is referred to as the COPE index. Once the rankings have settled, and the best traders have been identified it allows for the top traders’ calls to be used to create an investment vehicle which leads to phase 2. Phase 2 aims to implement a variety of automated investment strategies originating from traders with consistently high COPE Index scores. Smart contracts on the Solana blockchain will be utilised to allow for investor funds to be traded on the Serum Decentralised Exchanged (DEX).

In addition to the COPE Index which aims to effectively create a twitter trader ranking with more insight and accuracy than currently available mechanisms such as Exchange PnL leader boards, the COPE engine will also aim to provide feedback identifying a user’s strengths and weaknesses based on the calls they have made, providing feedback and suggesting future recommendations. This feedback is referred to as a COPE Report.

Lastly, another unique feature is that COPE is aiming for future cross-chain implementation. As of writing, COPE has been minted solely on the Solana blockchain, however the developer team has outlined future plans by which a portion of the COPE supply minted on the Solana blockchain will be burned, and the same amount will be minted on the Ethereum (ERC-20) blockchain. In turn this will allow the COPE engine to then be able to process trades being made on Ethereum based DEXes (i.e. Uniswap, Sushiswap and 1inch). The future cross chain implementation is worth keeping an eye on, as two key opportunities are expected to arise:

1 – Upon minting/release of ERC-20 COPE, significant price discrepancies are expected to arise with SPL COPE, with the developers expecting arbitrage bots to ensure that price remains uniform across both chains.

2 – Existing SPL COPE holders will be asked to provide their ERC-20 addresses to receive a spacedrop, which for all intents and purposes will be identical to an airdrop.

The cross-chain implementation will offer the opportunity for further COPE to be accumulated at a discount to the market (case 1) or for free if SPL COPE is held in advance of the cross-chain implementation (case 2).

Tokenomics – released 24/04/2021

From the most recent update which is the circulated COPE tokenomics document there are currently 16.5 million COPE tokens in circulation, with over 90% of these being owned by the community. An airdrop of 2000 COPE to 5000 wallets (total 10 million COPE, 60% of circulating supply) was used to seed the initial community. COPE is also currently trading on both FTX (million USD average daily volume) and the Serum DEX, with a liquidity pool also available on Raydium allowing for swaps of COPE or alternatively for COPE holders to provide liquidity to the pool, receiving yield in return.

The tokenomics expanded upon the Leaderboard, introduced the COPE trading pools and contained the surprise addition of the COPE Index. Up till the release of the tokenomics document there had been no mention of the COPE Index. COPE trading pools are the effective implementation of the automated investment vehicle which was outlined in phase 2 of the whitepaper, another indicator of the accelerated timeline on which the project is on. The leaderboard was outlined previously in the whitepaper. The language regarding the role of each component revisits the outline laid out in the whitepaper.

“The COPE Leaderboard allows us to catalogue and understand the skills of the most effective investment minds in the community. The COPE Index allows the Community to harness and invest in those minds. The COPE Trading Pools will allow Community members to select call makers with the most effective performance.” 

The COPE Leaderboard effectively creates rankings of traders and allows for insights into their trading with the generation of the individual COPE reports. However, the tokenomics document indicates a bi-weekly re-ranking of the traders as opposed to the monthly re-ranking laid out in the whitepaper. Additionally, the top 100 traders will be awarded COPE tokens. The technical details of how each traders rank is calculated are quite complex and do not offer any significant insights. They can be found in full on pages 4 and 5 in the tokenomics document. The rewards for the top traders are fixed at 4000 COPE for the first three months, and the amount can be reviewed by the community after the leaderboard launches. In the case of severe underperformance of traders on the COPE leaderboard, it is possible that not all of the reward allocation (4000 COPE) is distributed. Depending on the overall performance, a proportion of it might be withheld. Lastly, in the case of a trader believing that one of their trades has not been interpreted/settled correctly, they will be able to dispute the ‘settlement’ of their trade by putting at risk some of their COPE tokens, with a maximum limit on the number of tokens that can be put at risk. If the trade was correctly ‘settled’ the trader will lose their COPE tokens which they had put at risk, however if the trade was wrongly ‘settled’ the traders will receive back double the amount of COPE tokens which they had put at risk.

The COPE index is outlined for the first time in the tokenomics document. It can succinctly be summarised as a pool of tokens selected by the leading traders as per the COPE index once their rankings have stabilised (i.e. once multiple bi-weekly re rankings have occurred). The tokens which will be eligible to be included in the pool are determined based on criteria decided by COPE holders via governing protocol. Some examples of such criteria are Market Cap, Volume, Liquidity, Number of Trading Pairs and Volatility however as it is intended to be community based, any criteria can be possible and acknowledgement of this is made. Index calculations are highly technical and can be found on pages 7-8 of the tokenomics paper, however they are also subject to change based on community voting. The Index will rebalance every few days however no exact time is provided. The below flow chart was provided as well:

Effectively, the index will allow for users to have personalised pools of the tokens selected by the top traders, which will automatically harvest profits and rebalance the personal pools every 48 hours. The profits harvested in USDC will be split:

  • 80% to the investor wallet
  • 15% to the buyback and burn COPE treasury
  • 5% to charitable causes selected by the community

Additionally, upon withdrawal of the user funds from the ‘personal pool’ a 0.5% withdrawal fee will be charged and sent to the buyback and burn COPE treasury.

The COPE trading pool allows a user to replicate a trader’s trades on an automated basis and is effectively a copy/mimic trader.

Profits are once again harvested every 48 hours and are split:

  • 65% to the investor wallet
  • 20% to the trader
  • 10% to the buyback and burn COPE treasury
  • 5% to charitable causes selected by the community

Similarly, to the COPE index the harvesting period can be reviewed and changed by the community.

As the 3 key components of COPE have been analysed and explained this then carries us on to investigating the token supply, reviewing the deflationary mechanism (buyback and burn) and projecting potential demand drivers for accumulation of COPE.

Token Supply

The below figure is sourced from the COPE tokenomics report and indicates the projected buy and burns of COPE over the next four years. These are projections based on anticipated demand and use of the COPE products mentioned above. The paper specifically outlines the following mechanisms which will be used to burn COPE and have already been implemented:

  • SPL token distributor – coding tool which will allow other projects to seamlessly airdrop their tokens to solana based wallets. There is however a fee of 200 COPE to use the tool.
  • COPE spent by users unlock their own or others personalised COPE report – 10 COPE per report unlocked, 7.5 COPE burned.
  • Fees from the COPE index and trading pool – as outlined previously.

Along with planned future additions which will contribute towards the buy and burn:

  • Premium Market Reports – Exclusive up to date reports from well known members in the community, costing 12 COPE.
  • Serum DEX analytics – Effectively providing users with a power explorer and an automated trade history for their trades on Serum DEXes, costing 15 COPE.
  • COPE merchandise – 5000 COPE masks in Year 1 at 10 COPE per mask.
  • Limited edition COPE merchandise, with a low supply following a Unisocks style bonding curve

The above mechanisms combined with predicted user numbers by the development team gave rise to the below buy and burn projections. The projections will be affected significantly by the number of users. Measures to control the supply have already been planned for and put in place. A significant influx of new users acquiring and holding COPE, would serve to increase the amount of COPE burned in the first year compared to projections, decreasing the already limited supply (16.5 million in circulation), with staking and liquidity providing (via Raydium) serving to further limit the available supply on the open market. Providing liquidity also has a hidden benefit, as users who provide enough COPE-USDC liquidity to the Raydium pool to accrue 1000 LP tokens will have unlimited unlock capabilities for the COPE reports of any trader. This effectively incentivises COPE report power users to remove another portion of COPE tokens from the actual circulating supply.

The developers have also made it clear that a long-term goal is maintaining the current Community/Organisation split of 90%/10% of COPE holders. The allocations outlined in the below table are expressed as a percentage of circulating supply and will be impacted by a burn model so as to target a maximum of 8% yearly inflation rate, with the goal of becoming deflationary over time. This implies that at the end of Year three there will be less than or equal to 20,785,248 COPE tokens in circulation. Organisational allocations and the projected supply schedule are listed below:

  • Charity donations – 0.3%
  • Early contributors from the community – 0.8%
  • Liquidity Reserves – 2.5%
  • Community Grants – 1%
  • Ecosystem Grants – 2.2%
  • Liquidity pools and yield farms – 5%
  • Advisors – 2% (1-3 year linear time lock, i.e. 0.66% per year for next 3 years)
  • Investors – 3% (1-3 year linear time lock, i.e. 1.0% per year for next 3 years)
  • Core Team – 5% (1-3 year linear time lock, i.e. 1.66% per year for next 3 years)

Present End of Year 1 End of Year 2 End of Year 3 End of Year 4
Circulating supply 16,7000,000 17,950,000 19,150,000 20,250,000 21,000,000
Yearly inflation 7.48% 6.68% 5.74% 3.71%

 

The developers are aiming for a steady increase of the supply in order to accommodate projected increased demand for COPE by the community and Solana ecosystem, however the schedule outlined above can be changed if the community formulates an opinion on this. Similarly, to most aspects of COPE which are intended to be ultimately governed by the community, future token distributions will be governed by a smart contract with community agreed rules.

Projecting COPE available on the open market

Reviewing the uses of COPE, it is important to differentiate between the circulating supply and the actual available tradeable supply. The rational, reasoning and calculations behind the figures reported by the developers are only estimations and projections and are still subject to change especially as the community weighs in on them via governance protocol. To calculate the tradeable supply available on the open market some assumptions have to be made.

As mentioned earlier COPE can be bought and sold via FTX and the Serum DEX, whilst swaps are also available using Raydiums’ swap feature. From the 16.5 million COPE in circulating supply, according to the tokenomics 2.5% of the circulating supply will be provided for liquidity purposes, so it is safe to assume this percentage was provided between FTX and Serum DEX in some proportion. This amounts to  COPE being provided to exchanges.

Reviewing the non-community allocation of COPE, it is safe to estimate that a further 7.5% of the circulating supply is split between charitable initiatives, early contributors, advisors, investors and the Core team.

Subsequently, as of writing the Raydium COPE-USDC pool is reported to have a total value of 22.1 million USD. Participation in the liquidity pool requires the user to deposit COPE and USDC in a ratio at their current trading price, (i.e. for every 1 COPE, approximately 2.5USDC, current trading price). If the price of COPE changes then so too does the ratio of COPE|USDC required to be deposited in the pool for participation. Assuming an equal split of the pool value between USDC and COPE, the pool consists of approximately 11 million USDC and 4.4 million COPE with the current price of 1COPE| 2.50USDC. The 4.4 million COPE providing liquidity make up 26% of the circulating supply.

A large amount of the 10 million tokens airdropped are still being held by the recipients. It is safe assume that a large share of these tokens are being used to provide liquidity via Raydium as outlined above. The airdrop constitutes 60% of the circulating supply, and with the assumption of half of these are being held by community members, that accounts for 30% of the circulating supply.

Lastly it has been made public knowledge that several prominent Venture Capital firms have made significant investments in COPE at an early stage. It can be assumed that a further 10% of the circulating supply is being held by reputable venture capital firms such as Sino Global Capital and Three Arrows Capital, due to the price of COPE around the time of their investment.

Combining the above percentages of the circulating supply, one arrives to the conclusion that 76% of the circulating supply is not expected to be available on the open market, as visualised in the above pie chart. This implies that only 24% of the circulating supply, approximately 4 million COPE, is currently available on the open market and can be custodially owned (i.e. held in a user’s private wallet and not on an exchange).

The limited amount of COPE available on the open market, in conjunction with the benefits of accruing 1000 LP by contributing to the liquidity pool on Raydium (unlimited unlocking of COPE reports, as opposed to a 10 COPE fee per report unlock) constitutes to increase the appeal of accumulating and holding COPE on a custodial non-exchange wallet whilst also providing liquidity. With the deployment and release of the SPL token distributor which was successfully used for the first time by a non-COPE project (FTR) on the 02/05/2021 to airdrop tokens to wallets holding at least 1000 COPE. This further incentivizes holding cope in a private wallet. On 03/05/2021 FTX added COPE as collateral for traders further increasing the appeal of holding COPE. With a price of 2USDC per COPE on 31/03/2021 when initially listed on FTX, Cope reached and sustained and all time high of 8USDC (15/05/2021), before recent price action following the market crash stabilised to 2.5 USD. This price action has been achieved without any of the three core components of COPE (Leaderboard, Index, Trading pools) being released, or working versions being demonstrated. Additionally, as COPE is built on Solana, and offers value due to its technology it should theoretically be uncorrelated from the behaviour of BTC.

Team

As of writing the lead developer can be found on Twitter (@cyrii_MM) and tracking the projects Github and roadmap, development is proceeding rapidly. The team has extensive crypto developer experience, stemming from their work on the institutional grade crypto data platform, APEX:E3. Their skills were recently displayed with the rapid building, testing and deployment of the bulk SPL token distributor, as to date there was no tool on Solana for airdrop distributions. Suffice to say the team is in the upper echelon of developer teams working on the Solana ecosystem, which in turn offers a COPE a significant competitive advantage compared to other projects. Additionally, for COPE to be trading on FTX indicates that the team at FTX has done their due diligence and the developer team and COPE successfully passed their checks.

Adoption by traders

As outlined earlier crypto twitter is a thriving community, with many influencers already sharing their market insights, positions and trades with their followers. COPE will allow influencers to continue engaging with their following as they have been to date, offering an additional revenue stream whilst requiring them to do no extra work. Thus, adoption of COPE by twitter accounts with a large following is beneficial to everyone, the owner of the twitter account/trader can increase their profit, their followers can rest assured knowing that the trader is being held accountable in a transparent manner whilst also retaining custody of their funds whilst also automatically following the traders’ calls, and the COPE ecosystem will continue to grow. If the COPE team can successfully deliver on all the promised features of COPE, the possibility for COPE to go viral and enter mainstream adoption are extremely high. A rapid increase of participants in the COPE ecosystem will lead to a knock-on effect, as more tokens than projected will be burned, further decreasing the already small actual circulating supply, leading to a much larger demand than supply, a catalyst for rapid price appreciation. Of course, if development stagnates (deemed highly unlikely with the skills and work rate of the developer team), an opposite scenario is just as likely to occur.

Upside, Risks and Potential Pitfalls

As of writing none of the core components of COPE (Leaderboard, Index, Trading Pools) have launched yet. Whether the developer team will be able to get COPE to work on a production scale is a question no one knows the answer to, especially due to the associated complexity of what they have laid out in their documentation so far. However, the existence of documentation and rapid development are encouraging signs.

Many of the other risks associated with the COPE project are highly technical in nature or are simply data/Artificial Intelligence engineering problems. The majority of issues such as:

  • parsing a trade correctly from a tweet and subsequently settling the trade
  • multiple accounts owned by the same person releasing opposing trades
  • deleted trade tweets
  • price feed delays
  • copying high performance traders trades
  • fake followers
  • frontrunning

These issues have been adequately addressed in the tokenomics report, however, the details are highly technical. Hence, they are not included here. As with all cryptocurrencies, a vulnerability in the protocol/code that might be discovered by a malicious actor is always present. Such risks exist with all cryptocurrency projects and are usually alleviated with the inclusion of bug bounty programs. In this case, the identifier of a vulnerability is rewarded for reporting that vulnerability to the developer team and not taking advantage of it for nefarious purposes.

In most cases the mantra ‘product first, token later’ has been excellent advice, as ‘token first, product later’ has inevitably led to disappointment. In the specific case of COPE:

  • The upper echelon developer team and rapid development since inception.
  • The whitepaper and tokenomics, with a challenging but well thought out and clear roadmap for the project.
  • The aim to fill a significant gap in the market (social investing), whilst also being first to market.
  • The passionate and rapidly growing community around the project, which is also backed by respected and influential figures and venture capital firms.
  • The airdrop of 60% of circulating supply to early users and the miniscule in comparison to other projects developer allocation.

This requires that an investor looks past the fact that there is no functioning product. Instead, it evaluates future potential in terms of risk/reward to make an investment decision.

This is not financial advice, however acquiring 1000 COPE in order to be eligible for future project airdrops carries an excellent risk/reward ratio. The investor not only stands to gain from potential positive price appreciation of the COPE token as the developer team releases the planned products, but also from receiving future airdrops of new project tokens using the bulk SPL token distributor. The risk/reward ratio changes significantly if the amount of COPE to be acquired and held is below 1000 as the investor will then not be eligible for all future airdrops which are an important factor in reducing potential risk. The upcoming release of COPE games should also offer some positive market momentum and increase user engagement.

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