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DeFi Vampirism Draws First Blood As Dracula Protocol Upgrades to v2

by Dracula Protocol March 20th, 2021

Too Long; Didn't Read

Dracula Protocol upgrades to v2,022, v2: Dracula Protocol. Dracula Protocol aggregates all yield farms and liquidity mining under a single smart-contract and unified web interface. We believe that our solution will help with the stability of the DeFi ecosystem. We invite all members of the crypto community to join us. Our idea was to exploit and punish whale-baked farms with a second-layer “vampire” concept… We don’t have deep pockets. We have no corporate support, no corporate backers, and no secret donors. And we’re proud of that. It’s what makes us different from other projects like us.

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featured image - DeFi Vampirism Draws First Blood As Dracula Protocol Upgrades to v2

The DeFi ecosystem has developed a lot during recent years. Yield farming and liquidity mining have become a gold standard. However, it’s often associated with immense risks of long-term failure due to inflation, and under-collateralization of tokens.

Meta-level vampirism concept implemented in Dracula protocol delivers higher profits while mitigating those risks. It does so by aggregating all the yield farms and liquidity mining under a single smart-contract and unified web interface. We believe that our solution will help with the stability of the DeFi ecosystem.

We started $DRC and Dracula Protocol as a reaction to the unfairness that occurred with Sushiswap. When Sushi entered the market, centralized exchanges and major corporations listed and supported the project, despite its lack of ingenuity or novel ideas.

This support from big money resulted in vicious dumping on ordinary retail investors and eventually led to a massive price crash. Dracula Protocol was meant to combat this type of behaviour; our idea was to exploit and punish whale-baked farms with a second-layer “vampire” concept…

We, the Dracula team, don’t have deep pockets. We have no corporate support, no VC backers, and no secret donors. And we’re proud of that.

It’s what makes us different from other projects like us (such as Sushi, for example). We earnestly set out to build a tool that would evolve to the point that would stop exploiting the ecosystem and eventually coexist within it with a capitalizing value above the victims’ APY.

However, pressure, perfidy from whale-miners and wallets associated with one of the CEX squandered that possibility and squelched new community-driven projects and ideas.

We Aren’t Alone

The entirety of DeFi has been a zero-sum game over the last few months; money wasn’t being generated; it was being redistributed among participants. The vast majority of that distribution has been from small investors to larger wallets. It hasn’t even been subtle; look at the pump and dumps that happened with Sushiswap and Curve.

Moreover, almost every major company in the DeFi ecosystem (Curve, Uniswap, 1inch, Dodo…) has conducted some private sale exclusively for a closed community of investors and donors who bought their shares at a 90–95% discount from current market prices.

These sales have been exclusionary and predatory; no ordinary users without tight connections to corporate investors were ever invited to join. On top of all of this, the projects themselves premined massive portions of supply, securing their own future wealth to the detriment of retail.

All of this caused ordinary investors to receive incredibly minute fractions of the supply, as they were forced into liquidity mining programs for tokens with barely any utility and which suffered from constant and relentless price declines.

These projects, often by design, allow the initial corporate investor circle to capitalize on the efforts of common users, eventually allowing these whales to dump on community members. You probably are already aware of all of this. It’s happened with most DeFi coins at this point.

A Declaration of War

It doesn’t have to be like this. We can make a change and be reactive to our environment. Accordingly, we propose a new direction for our project. That direction is a declaration of war against the current vicious circle that has harmed so many average investors. We invite all members of the crypto community to join us.

V1 Story

Our project provides users with proxy pools for staking funds.
Staked funds transferred to the corresponding victim’s pools using adapters for the victims’ contracts. This results in Dracula smart-contract receiving victim’s tokens and the user receiving DRC. Invoking a drain functionality sells victims’ reward tokens for ETH, swapping ETH in the DRC-ETH pool and then burning DRC, increasing DRC/ETH ratio as a result.

DRC -> ETH

DRC -> ETH utilizes buyback mechanics. Our victim pools earn tokens from their underlying protocols, such as UniSwap, SushiSwap, and Pickle. These yields are gathered through our ‘Drain’ function, where the underlying tokens earned (UNI, SUSHI, PICKLE) are sold for WETH.

Under our new tokenomics, 50% of the WETH goes to buying and burning DRC. 45% of the WETH goes to provide liquidity for the DRC-ETH, which is locked permanently. The remaining 5% goes to fund the pool, which is how DRC stakers in this pool earn yields in ETH.

DRC -> DRC

DRC -> DRC utilizes mint and rewards distribution. Stakers of this pool earn 4% of the total DRC mint (50% from mint to dev address). The remaining 4% of minted DRC goes to our developer fund.

Keep in mind DRC is minted at an inflationary rate until the circulating supply reaches around 10M. Once that number is reached, the community will have to decide if the supply should be capped or increased.

Collecting Rewards

The Dracula Horde Pool (DRC -> ETH) is just a regular staking pool: When you stake there, you earn rewards in ETH over time. The pool is currently being funded in a non-linear manner due to the ‘Drain’ function, (approximately once every 12 hours), but the distribution is linear and constant due to the contract logic.

Because of this, you may see some fluctuations in the amount of ETH earned.

DRC -> DRC pool is a bit different. You stake your DRC and receive a BLOOD — LP token. This pool is funded with DRC in a non-linear manner, and since you own a share of the pool (represented by the BLOOD token), your total amount of owned DRC will increase in non-linear manner as well.

You also cannot ‘harvest’ — only stacking and unstaking. You ‘harvest’ your shares of DRC by unstaking from the pool. You also receive voting power with BLOOD, which will be implemented soon.

Keep in mind that 1% of your staked DRC is burned when you unstake. This mechanism is in place to prevent repetitive entry and exits to the pools and provides a layer of stability for the DRC token.

Timelock:

Contracts are protected with timelock with 24 hours delay on any action. We made some deviations from default timelock, to ensure that user funds are 100% safe and to be able to reach them even in case of emergency. Transfer ownership transaction.

First of all, our main MasterVampire smart-contract contains several particular roles. They are:

```
Owner
```
```
PoolRewardUpdater
```
```
VictimRewardDrain
```
```
Developer
```

Developer

' is the address, that receives developer fee, and the only function that is available to 'Developer' is to change the address for developer fee.

VictimRewardDrain

' is the address, that in future will receive a part of victim's claimed reward and ETH from their sale. At this moment, this role is inactive.

PoolRewardUpdater

' is a distinct role, that allows changing every pool reward minting rate. At this moment, we are manually controlling the reward rate through this role. However, in two weeks or so, we will deploy a smart-contract, that will automatically calculate the necessary reward rate based on our TVL, TVL of our victim and victim's APY.

Owner

' is the most powerful role, 'Owner' of MasterVampire can add new pools, change the adapters for existing pools, change the addresses for other roles, change the upper limit for pool rewards and so on.

Now, every role except '

Owner

' could not potentially do any harm to the users of Dracula Protocol. For instance, deploy a malicious Vampire Adapter, or make an infinite number of fake pools.

Our development philosophy is that we are not asking our users to trust us. So, our code is written in a way, that any potentially dangerous action should be visible to our users and that users will always have time for deciding before such action is performed.

Precisely for that purpose, we have inherited our MasterVampire contract from Timelock contract that was written initially by Compound team.

[https://github.com/Dracula-Protocol/contracts/blob/main/MasterVampire.sol#L16]

Since in the transaction, the '

Owner

' role is set to the MasterVampire contract itself. That means that only MasterContract itself is able to invoke functions that require '

Owner

' role.

Yes, we are still the admin of the Timelock part of the contract, but we are no more the '

Owner

' of the MasterVampire. So, whenever we want to call a function that is accessible only for the '

Owner

', we should push it through the TimeLock part. The Timelock contract itself is written in a way, that anyone can see what are we want to do with the MasterVampire contract with 24 hours delay.

One might ask, why haven't we deployed a separate Timelock contract and transferred ownership to it?

The answer to that question is simple. Lately, DeFi community have seen a lot of smart-contract bugs that effectively lock user's funds on the contracts, renders them inoperable.

We don't want that to happen. In the unlikely case, where we have made a mistake in one of our smart-contract, the very same Timelock mechanism would allow us to transfer user's funds back to users.

Indeed, this mechanism might be maliciously used by us as well, but that is precisely the reason why there is a delay imposed on any of our action. We believe that 24 hours is sufficient enough delay for any user to make an educated decision whether they should withdraw their funds from our contract or not.

https://etherscan.io/tx/0x3cfd71bb8790868af0a850f078dddf2ea5af977eea59e2099d394fc36ade9e96#eventlog

Rebalance weight for pools formulas used:
APY used - victim pool APY.
TVL_victim_pool * APY^0.5
TVL_victim_pool * APY^0.65
TVL_our_pool^0.3 * TVL_victim_pool^0.7 * APY^0.65
TVL_our_pool^0.6 * TVL_victim_pool^0.4 * APY^0.85
TVL_our_pool^0.65 * TVL_victim_pool^0.35 * APY^0.75
TVL_our_pool^0.65 * TVL_victim_pool^0.35 * APY^0.85
TVL_our_pool^0.65 * TVL_victim_pool^0.35 * APY^0.85

How Drain works:

1. You stake ETH-USDC in SushiSwap TAB

2. Your tokens farm both rewards - in SushiSwap and in Dracula Protocol, but you only get rewards from Dracula Protocol when you press "Harvest"

3. When you press "Drain" - Dracula Protocol harvest your rewards in SushiSwap, than swap them for DRC (from market, on uniswap) and than burns those DRC tokens

4. From "Drain" you support DRC price and burn a little bit of supply and help ecosystem. But don't press Drain too often, because you pay gas fees.

V2 Story

Although Dracula Protocol is only several months old, we have already been through several fundamental changes in our tokenomics and core contracts.

Throughout these changes, our community has stayed together and offered continuing support and feedback as to the direction they would like us to move towards.

What is Dracula Protocol V2?

Dracula Protocol V2 is a universal DeFi adapter that streamlines yield-farming for platforms such as Badger DAO, SushiSwap, and Stabilize by automatically collecting the underlying rewards on a regular basis, selling them for ETH, and investing the earned ETH into an interest-accruing strategy.

By staking through Dracula Protocol, users save money through the automation of compounding yields and crowdfunding gas costs. The entire protocol is governed by the DRC token, which can also be staked to earn a percentage of all yields from underlying platforms.

What are the Features for V2?

New Interface: Dracula Protocol has a new, professional look! With a sleek interface designed to aid in our users’ experience, Dracula Protocol V2 will now cater to all levels of experience for DeFi users.

The biggest improvement is that users can now deposit their base assets into the underlying platforms and stake through Dracula Protocol without having to leave our website. Along with browsing features and a dashboard view, our new interface has everything you need when yield farming!

Self-Funded Drain: Our drain mechanism will now be funded by a portion of all yields from underlying platforms. Think of this as a way to crowdfund gas costs with all Dracula Protocol users, meaning the more value locked in Dracula Protocol (TVL), the cheaper the costs will be per user! We will be calling the drain manually to prevent frontrunning until our integration with Keep3r is complete.

Auto-Compounding ETH: After each drain, all ETH that will be distributed to victim pools liquidity providers will be automatically deposited into an interest-earning strategy to maximize profits. Depending on the strategy, this will earn an extra 6% to 15% APR in addition to the yield earned from underlying pools.

This feature is particularly important, as by compounding ETH for our users simultaneously, we create a system where it can be more profitable to stake through Dracula Protocol than the underlying platforms, even with Dracula’s fees. By distributing gas costs amongst all our users and enabling compounding, users will earn more ETH by staking through Dracula Protocol compared to performing the same strategy manually.

The exact APRs vary by the underlying pool, the current value of underlying yields, their performance against ETH, and the compounding strategy. We have created a Google Sheet where you can calculate your exact profits by staking through Dracula Protocol below:

https://docs.google.com/spreadsheets/d/1JPUYHFbiIoVGgSEzdB4LbmqKhWNGn23gZSOCf5kaSQw/edit?usp=sharing

Adjustable Compounding Strategies: We are keeping the compounding strategies edited via our developer’s wallet, with a timelock. This allows us to change the compounding strategy to focus on the highest possible return possible, such as rotating between ETH returns on Aave, Compound, Yearn, or Alpha Homora.

Versatile Victim Adapters: We have updated our MasterVampire contract to be able to take on non-traditional victims, such as Badger DAO and TrueFi, which will enable a wide variety of platforms to be farmed through Dracula Protocol, including cross-chain farming.

Rewards in DRC or ETH: Although all yields earned from victim pools will remain in ETH while collecting interest in our compounding strategy, we are giving users the option to receive their rewards in ETH or DRC. This option will allow users who want to receive stable yields in ETH, or users who want to earn DRC to be able to stake and earn more ETH, to be able to exist simultaneously.

Note: If you choose to earn your rewards in DRC, the ETH you would have received will be used to market buy DRC upon harvesting. DRC supply will be capped on the launch of our V2 contracts. More details about our tokenomics will be released in our next post.

Developer Test Environment: In order to incentivize the development of more victim adapters, we have created generic test-cases for developers to use when creating new contracts. Along with a 1–3 ETH bounty for each new victim adapter, we hope this will help incentivize community developers to work with us going forward!

DRC Supply Cap: The DRC token, which can be found on Etherscan at https://etherscan.io/token/0xb78B3320493a4EFaa1028130C5Ba26f0B6085Ef8, will have a capped supply at the launch of our V2 contracts, which will be an estimated amount of 15,000,000 DRC. At the moment of deploying, all DRC minting will be disabled.

From here on out, there will never be a new DRC token minted again. Although this can be changed through a governance vote, the Dracula team strongly recommends a hard-cap on the DRC supply.

Static Supply: Although there has been discussion around deflationary tokenomics, we have decided to not follow that path. By not having a percent of our drain allocated to burns, we can use the additional yield to increase the earnings of stakers for our victim pools and our DRC pool.

Drain Allocation: Once every day, our platform will sell underlying rewards for ETH, which is known as a ‘Drain’. This drain will be called by the Dracula team and is funded by a portion of the underlying yields from victims. Going forward, we have plans to integrate a system of nodes to automatically call the drain once certain parameters are met through a strategic partnership.

There will be no Tokenswap in V2. Users will have to restake. Burn rate will be set to 0 with V2 launch:

https://github.com/Dracula-Protocol/contracts/blob/a601606200900c9d908f9742bec2393d4d19b27c/RewardPool.sol#L67

Each drain will be distributed as follows:

85% of each drain goes to liquidity providers of victim pools, such as SushiSwap or Pickle. These funds are automatically invested into an interest-earning ETH strategy, which will accrue additional yield until each user chooses to harvest their individual earnings. Users can choose to harvest their yields on ETH, or in DRC, for any of the pools. If a user chooses to harvest their yields in DRC, then the ETH they have earned is used to buy DRC off the open market at the time of withdrawal.

Note: If a user unstakes within 24 hours from depositing into victim pools, there is a 0.5% fee taken from their liquidity. This is to prevent manipulation of the drain mechanism.

3.75% of each drain goes to stakers in the DRC staking pool. This will be the only DRC staking pool, yields will be in ETH.

3% of each drain goes to liquidity providers of the DRC/ETH pool on {REDACTED}, yields will be in ETH.

3% of each drain goes to liquidity providers of the DRC/ETH pool on Uniswap, yields will be in ETH.

3.75% of each drain goes to the developer fund to help continue the ongoing development of Dracula Protocol, yields will be in ETH.

1.5% of each drain goes to the gas fund to pay for future drains, yields will be in ETH.

Note: After each drain, these rewards are linearly distributed to each user over the following 24 hours, which will ensure consistent yields rather than spiked earnings after each drain.

DRC Utility: The DRC token can be currently staked to earn 3.75% of all ETH that comes from drains. This design ensures that APRs for DRC staking is directly dependent on TVL of Dracula Protocol and the APRs from underlying platforms.

If Dracula Protocol manages to capture significant TVL from underlying platforms with high APRs, the staked DRC token will have a direct cash-flow to this performance, paid in ETH. This token design is meant to focus on ROI for DRC token holders, where their initial investment to earn a share of protocol performance is quickly outpaced in terms of ETH earned.

DRC also has voting rights to the future of Dracula Protocol. Going forward, we plan on adding new features to add to the utility of DRC, such as integrations with lending platforms, tokenized staking for composability, and more.

We believe that the DRC token can be used as an index token for the performance of the underlying DeFi platforms, as its returns are directly dependent on APRs for its victims, which are a result of healthy token appreciation from underlying platforms like SUSHI or PICKLE. This functionality creates a synergy between Dracula and its victims and opens the possibility for future collaboration with any of the underlying platforms.

The implications of the V2 DRC token design are massive and we are truly excited to have this idea come to fruition. Our next update will be at the launch of our V2 contracts on mainnet, where all of the described changes will be live in production. We will also be detailing our ecosystem partners after our V2 launch, which are fundamental to Dracula Protocol, DRC, and the future of DeFi.

Upon our launch, we will include details about our finalized tokenomics for DRC, new victim adapters, ecosystem partnerships, and plans going forward.