Dynamic Range Unlocking

IMPORTANT NOTICE: This is a ‘concept’ under discussion. It is not yet a formal governance proposal. The ideas contained in here may not ever reach a formal proposal. This is for exploring new ideas

With the unlocking, we currently have a 3 year time in which tokens will unlock.

Some users have concerns that the Bao burnt in synthetics will not be at the scale needed for offsetting the unlock cycle.

One design in which we could create to change this would be a dynamic unlock.

Basically the way it would work is you would set the lock range to a much higher date (like 10 years), and an oracle that looks at the amount of Bao burnt each day.

Every time there was less Bao burned that day than was unlocked, the oracle would increase the lock time.

Every time there was more Bao burned that day than was unlocked, the oracle would decrease the lock time.

You would then have some absolute cap date to prevent the extended lock happening forever. And you can have some dampening variable in either direction so that it can be over or under by a little and not adjust.

That would be a large change in tokenomics but it is a possible way to dynamically address the inflation rate over the adoption curve of the product.

13 Likes

This would stabilize in- and outflow of tokens. Do it!
But It should not be 1:1 but rather a little bit more for some inflation to hit the market. I propose the Golden ratio Golden ratio - Wikipedia as unlock target. For 1000 BAOs burned, max 1618 BAOs get unlocked. One could call them Golden BAOs :star_struck:

4 Likes

So this would apply to the already locked BAO? I’m not against a change to the strategy but I would also like to get an idea what those numbers would look like in terms of bao burnt / unlocked / totals, which I guess is pretty difficult at this stage

It would apply to currently locked Bao if we did it.

Remember this is not a governance proposal this is just an early idea to explore. These concepts should not be viewed as something that will be implemented. Just ideas.

The concept here is that the numbers would balance, so you would try and get the daily unlock to always roughly match the burn. There is no clear projection on what that would look like, just that it would vary between 0.75:1 to 1:0.75 or something like that and try and settle in that range.

4 Likes

I don’t like this idea as it would be changing a contract after everyone agreed. We staked our LP under certain assumptions with relating to locked tokens and to change that would not be right. We should look at other ways to increase the burn of tokens through buybacks and such.

4 Likes

The burn generated by the protocol essentially is a buy back.

But you can’t buy it back at a rate that is more than the fees collected as there is no where for the money to come from.

This idea would aim to address that by trying to keep the amount of dilution balanced with the amount of burn that is happening.

It would mean tokens release over longer scales but are worth more if the protocol has a slow growth curve, but if the growth curve is fast then tokens could in theory unlock faster.

5 Likes

What about a portion of the fees earned from LP be set aside in escrow for purchase of tokens when they start unlocking and have it continue for three years?

I like the idea, it makes sense to have more control over inflation, but as @linksirsergeynazarov mentioned, we all provided LP with the 3-year vested rewards in mind. This is why we have governance votes though, let the people decide. Also as @hulahoof mentioned, I think this is something that we should hold off on until we get a better idea of how burning and synth production works. And referring to @Optilon’s post, I am all about the golden ratio, good suggestion haha. All in all, I think this concept makes sense.

6 Likes

I agree with linksirsergeynazarov , decisions of buy & hold BAO vs staking it have been already made by many people, and the consequences (farmers have less BAO on hand now due to IL) have occurred. The proposal would favor those who have bought & hold BAO with a plan to sell soon while hurting those who farmed with a timeline of 3 years in mind

3 Likes

Why would that make sense? It would be better to not charge a fee.

The fees are also really small volumes on LP deposit/withdraw and wouldn’t make a dent in circulation.

I think it’s great that you’re trying to offset or even outright prevent the inevitable dump upon the December unlock. I don’t have enough of a grasp of economics to feel like I can give a reasoned and intelligent solution but I will say that it is better for all of us if on day 2 post-unlock our Bao is worth a similar amount to day 1, and so on, rather than much less due to supply shock. I think 10 years might be a little drastic and will put people off, after all most people think that a year is an age in crypto, so a decade seems too much. It’s certainly worth thinking about though and the concept proposed is the sort of clever I have come to expect from you.

3 Likes

I think the idea is good , implement it but make it optional for the user in how much further they can lock up 5 - 10 years etc also give the user the option in how much of there locked bao they can lockup a ratio of 50% 10% 20% and incentivize with bao of course the longer you lock up the more bao interest you receive,

Advise everyone they are defaulted for 3 years unlock but you have the option to lockup further to earn more bao, give them a offer they cant refuse lol,

just one last thing, you are going to know how much bao is going to be released per day once the unlocking starts , the sooner you implement the option to lock bao further for 4,5,6 ,10 years etc, the easier it will be to offset the burning to try and get that balance right, if you need more bao locked up give a higher interest of bao,

I am not sure you can have a user choose their own preference. It would immediately upset the balance which is why the system would exist in the first place.

For what its worth, the 10 years was just an example. Whatever you set it to really doesn’t matter because the idea here is that it would adjust to match the inflation rate.

3 Likes

This is something really interesting. But as the rules will change, and that early birds could feel that there is some form of injustice, could we (if voted…) propose a “redeem all locked bao” now with penalty fees.

When redeemed, all locked bao would be redeemed, but to a certain ratio (ex : 15%). The rest could be burned or transfered to treasury.

The ratio could change over the same algorithm as the locking period.

1 Like

Sadly that is something we don’t have the ability to do with the current lock contract.

All we can do is adjust the start and end date of the lock but we can’t change who it goes to or where it goes.

I also think the economics of it would change if you let too much redemption happen.

Part of the point here is though that early birds would also have to vote for this (they have the most voting power) but its actually an idea that would defend the value of their Bao long term.

One of the challenges I knew I would come across in designing the economics is that most people are very short sighted and impatience :P

If you people just want their tokens dumped for liquidity on day X it would devalue them.

What we are saying here is let the market decide.

If the tokens are worth a lot because the fees being used are significant then unlock would happen faster than 3 years.

If the tokens weren’t worth a lot and unlock would dilute and hurt everyone holding Bao, then drag it out so it matches the fees and therefore is worth more over time.

Really, no matter how much you hold, the dilution event is significant and we should all want it steady.

I think some people are looking at the Bao value estimate and going “GREAT I get $XX,XXX/year when it unlocks and I don’t want to delay that” but if the burn volume is too low and dilution is too high then that will rapidly drop.

I am not suggesting we have to do this, but, I think there could be some very strong economic value in it, and I would recommend that anyone who is thinking “no! I just want my Bao ASAP!” think carefully about dilution impact and scaling :)

6 Likes

I really understand your point. I sometimes do the devil advocate. You mark a point in saying that early birds has more voting power and this is something i didn’t account in my thinking. If i add this in the equation, i trully admit that a governance vote that pass on that subject will be with the blessing of those early birds.

The other thing that got my attention is when you say “GREAT I get $XX,XXX/year when it unlocks and I don’t want to delay that”. I am wondering if the fact that we put current valuem and daily value of bao token when it will be unlocking favorise this kind of thinking ? I feel like we incite everyone to think of locked bao in term of pure investment when we show “When this unlocks it will earn you xx per day for 3 years. The equivalent of $ZZZ per year!”

Do you think that your proposal could be tied with Bao basket sBao ? Favorising burn mechanism by dynamic incentive ratio (Let’s say a range from 35-50%) ?

Sorry if i throw a lot of ideas at the same time !

2 Likes

Hmm these are very interest points that I’ve not ever considered.

I do think the future lockup estimate could be incentivizing the wrong behaviors and may want to think about replacing or modifying that.

And on the proposal being more related to sBao, I’m not sure how we’d actually get the two to sync up, that’d be a bit of technical complexity, but it is possible maybe? Worth thinking more about.

2 Likes

If some utility beyond governance can be derived from the locked bao, I am open to any number of release schemes.

2 Likes

Could we change the rewards and reduce remaining bao to be distributed?