YOP Sunset — The Why

YOP
3 min readNov 29, 2022

We want to take a minute to explain why it was decided that YOP Finance (YOP) should be sunset.

The short answer is that the maths no longer worked and the two sides of the equation were no longer balanced.

The longer answer:

The subsidiary YOP Ltd in Seychelles (where the product was held) was funded by the parent company Emergent Entertainment (Emergent), formally known as Pluto Digital (Pluto). From the day YOP was purchased until the day it was shut down, all staff costs for YOP were paid for by Pluto and then Emergent.

From the day Pluto acquired YOP in September 2021 until YOP went live in May 2022, Pluto paid all of YOP’s operating expenses. At the point it went live, YOP was to become a self-sustaining entity. It was given a loan from the parent company to help it and YOP set out to make a life of its own. As we all know, and as was covered in the Sunset Post, since May the crypto market has gone from bad to worse, but YOP kept fighting and tried to keep the books balanced. The loan was held in various crypto currencies, depending on what it was being used for (Marketing, Oracles, Audits, Bug Bounties, etc…). Although there was a market scare caused by Celsius a few months ago, BTC and ETH both rebounded from their then lows and looked, at worst, to be stabilising. Then came FTX. This significantly hit the price of, and confidence in, crypto and sent things lower. The lower prices meant on the current trajectory, YOP Ltd was heading towards insolvency when looking at the non $YOP crypto balance sheet ($YOP tokens were not calculated against operating solvency as most tokens were not earmarked for operating costs but $YOP tokens have also dropped about 95% in value since Pluto acquired them).

As the markets continued to trend sideways and down, the $YOP token price was not looking to appreciate any time soon. With the loan now the only thing keeping YOP Ltd afloat, a decision needed to be made to stop YOP Ltd going insolvent. The top company, now Emergent, would need to start paying for YOP once again. Both sides of the equation were presented to the Emergent board, the balance sheet value of the YOP protocol (which had decreased by approx 95% in value since its purchase in September 2021) vs the operating costs and costs to recover the market impact caused by FTX (meaning significant extra marketing spend). The numbers did not add up. At the current operating cost (even without extra marketing spend), in the next few months, it would cost more to run YOP than the Protocol was worth as measured by the Fully Diluted Market Cap. This would result in it being loss making for Emergent in every way, and in addition, as YOP is not inline with the vision and mission of Emergent, which is primarily focused on game development, funding a loss making protocol could not be responsibly justified by the Emergent board.

We wanted to turn YOP into a DAO. This would need 3 things:

  1. A strong community — A large contingent of the community would need to be committed to running the DAO. Although the YOP Ambassadors have certainly taken up this challenge, we are not at the numbers needed where this is close to becoming a reality — this is one of the areas where the extra marketing costs would be needed to grow the community.
  2. A strong TVL — In order for the DAO to function, it needs funding. APY generated from a strong TVL would allow the Performance and Management fees (coming from a percentage of the APY earned), to be fed into a DAO Treasury wallet. This would then be used to fund the DAOs plans going forward. As a result of market confidence, as this is written, the TVL is down over 80% from it’s all time high — this is another place where the extra marketing costs would be needed to try and turn around market sentiment.
  3. If there was a strong community and a strong TVL, even with the current market sentiment and $YOP token price, there could be a case made that Emergent should invest in the time and technology development needed to transfer the protocol into the hands of the community. Without the strong community and the strong TVL, any work done to turn this into a DAO would be wasted effort, as the DAO would not succeed. This is the sad truth.

--

--