Ahmet R.
Ahmet R.
Aug 17, 2022

Is Snowbank DAO a Scam?

tl;drSnowbankDAO was a DAO on Avalanche blockchain and was designed to be a decentralised reserve currency protocol. Snowbank was created to detach the crypto industry from the traditional finance world. However, the project saw an end sooner than expected, and many claimed it to be the same scam scheme as Snowdog. Even though the SB tokens are still in circulation, holders have reported issues cashing out their SB tokens. If you still hold SB or just want to learn more about scams, keep reading to learn if Snowbank was a scam.
Is Snowbank DAO a Scam?
Is Snowbank DAO a Scam?
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What Is Snowbank DAO?

First things first, it should be mentioned that Snowbank DAO couldn’t survive in the crypto market and has now redeemed a fixed USDC value per SB token to the SB investors. 

Snowbank DAO was a DeFi platform on the Avalanche Blockchain and a decentralised reserve currency protocol. Snowbank DAO treasury contained Snowbank tokens, which were backed by a basket of assets, such as:

  • Magic Internet Money (MIM)
  • SB-AVAX LP Tokens

This allowed Snowbank tokens to have intrinsic value that couldn’t fall below. Moreover, Snowbank DAO introduced economic and game-theoretic dynamics into the market through Snowbank staking and minting.

What Is a DAO?

DAO stands for Decentralised Autonomous Organisation and usually utilises smart contracts to run tasks that were once run by humans. DAOs operate mostly independently from humans and are fully transparent. Learn all about DAO.

What Is Snowbank Finance?

Snowbank Finance is just another term used to call Snowbank DAO. In other words, when people use Snowbank Finance, they are referring to Snowbank DAO.

What Is (Was) Snowbank DAO’s Main Goal?

Snowbank DAO aimed to develop a policy-controlled currency system on the Avalanche Network, where the DAO had high control over the behaviour of the Snowbank token.

The developers behind Snowbank claimed that this ecosystem would have a long-term potential to be used in optimising for stability and consistency. It would then enable the Snowbank token to function as a currency and a global medium of exchange.

The team was focused on optimising Snowbank Finance for growth and wealth creation in the short term. All this was done so that Snowbank DAO could enable the crypto industry to detach from traditional finance by achieving price flatness for a basket of assets, excluding any fiat currencies. 

How Did Snowbank DAO Work?

Snowbank DAO comprised a treasury managed by its protocol, protocol-owned liquidity, the bond mechanism (minting), and high staking rewards. 

Bonding in the "Mint" page generated profit for the protocol. After that, the Snowbank DAO's treasury would use the profit to mint Snowbank Coin, which was supposed to be distributed to SB stakers later. 

Snowbank DAO allowed people to participate in the DAO in two main ways: staking and minting. 

  • To participate as a staker, you needed to stake Snowbank Coins into the DAO, and in return, you would be rewarded with more Snowbank Coins. 
  • To participate as a minter, you needed to provide LP tokens or Magic Internet Money tokens (MIM) to receive discounted Snowbank Coins after a fixed vesting period.

How Did Snowbank Stakers Benefit From Snowbank DAO?

The primary source of benefit for stakers in Snowbank DAO was supply growth. The protocol minted new Snowbank Coins from the DAO's treasury and distributed most of them to the stakers. Therefore, stakers' benefits came from their auto-compounding balances.

With price exposure in mind, if the increase in token balance outpaced the potential inflation, stakers would make a profit.

How Did Minters Benefit From Snowbank DAO?

Price consistency was the primary source of benefit for minters in Snowbank DAO. Minters committed capital upfront and, in return, received a fixed return at a set point in time in the form of Snowbank Coin. Therefore, the minters' profit depended on Snowbank.

Who Created Snowbank DAO?

Snowbank DAO was a fork of Olympus on the Avalanche Network. The team members behind Snowbank mainly consisted of anonymous DeFi enthusiasts.

What Is Snowbank Token?

Snowbank DAO’s native cryptocurrency was the SB token. The idea behind the Snowbank token was similar to the gold standard’s idea. Each Snowbank token was backed by and not pegged to Magic Internet Money tokens (MIM) in a 1:1 ratio. 

To ensure Snowbank token’s price would stay at 1 MIM, Snowbank DAO’s protocol would buy back and burn SB tokens in case of trades below 1 MIM. However, there was no upper limit for Snowbank Coin’s price, and it could be traded at prices higher than 1 MIM.

Was Snowbank Coin A Stablecoin?

No, the Snowbank token was not a stablecoin; instead, it had been developed to be an algorithmic reserve currency backed by other decentralised assets. 

How to Stake Snowbank DAO?

It is not possible to stake Snowbank tokens anymore since the website is not accessible, and the project has been terminated. Moreover, users are reportedly having issues with unstaking SB tokens. 

How to Buy Snowbank DAO?

Before the termination of the project, Snowbank DAO was available on a number of exchanges, such as Open Ocean. The project is now shut down, and according to the last tweet of the Snowbank Twitter account on Feb 17, 2022, the project was doing a final redistribution.

“The final redistribution event starts today. Redeem it fixed USDC value per SB equal to SB risk-free value.”

A fixed USDC value per SB, equal to SB risk-free value, was redeemed. You would need to unstake your SB to redeem the equal amount of USDC. However, many users reported having trouble with unstaking their SB tokens.

Summary

Snowbank DAO was a reserve currency protocol on Avalanche Network. Its main goal was to create a decentralised ecosystem that could enable cryptocurrencies to operate separately from traditional finance. The SB token was backed by a basket of decentralised assets and was specifically backed by MIM at a 1:1 ratio.

FAQ

Let’s check the top FAQs to learn more about Snowbank DAO and answer all your questions.

How Do I Redeem My Snowbank?

You can unstake your SB tokens to redeem an equal amount of USDC.

Where Can I Swap Snowbank?

Currently, Snowbank’s SB tokens are only traded on Trader Joe Exchange.

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