It has been nearly 1 year since Bao launched and this community has many accomplishments to be proud of.
As a bootstrapped decentralized community run DAO, Bao has been able to launch multiple products. This is something that not even many VC funded projects can say they did in a year.
We moved faster than others did but slower than we wanted.
We had many successful moments and also lots of learnings.
Now with it being almost the end of the year it is time to take those learnings into new proposals on moving Bao forward.
Reminder: Since Bao is a decentralized community project, all concept proposals are working concepts that get decided upon by the community and galaxy member volunteers. My job in leading the maintainer galaxy is to help propose roadmaps but none of these proposals are final and none have specifics of implementation yet.
Redeemable coupon concepts are a bad idea and chew up time.
Governance franchise models are good for testing new technology in an isolated way, but many users struggle to understand this concept.
We had too aggressive of a farming distribution with BAO and the percent lockup was too high.
No matter how many times you tell people to not do something (and to read docs) they will not do it. So if you want to prevent something or discourage it, it needs to happen in code.
Good talent is hard to find. They don’t show up from high money offers but passion of the project.
Launching on sidechains doesn’t seem to attract automatic liquidity like mainnet does too many sketchy partnerships and incentive deals are what is driving liquidity on those networks.
Things we did:
Launched swap prototypes on xDAI with new farms.
Created a secure 1:1 token swap for redeeming Baocx coupons.
Launched a governance franchise on BSC with experimental governance models rewarding long term locking.
Launched soft synths on Polygon including $nDEFI token.
Created custom governance script to allow voting in locked and unlocked governance tokens.
Avoided any rugs, hacks or exploits despite being unaudited and running 4 products on 4 chains.
Built a model for decentralized volunteer teams to build a protocol in a flat model.
1) Proposing a shift in Bao’s goal:
Bao started with the goal of being a cross-chain ecosystem of token swaps, baskets/nests, and synthetic assets.
One thing we strongly learned is that it is not possible to do everything by ourselves and that’s how we started to build partnerships with projects like Sushi who already did things like provide strong liquidity on many chains.
I think that it may be good to shift the main objective goal of Bao from just trying to make these protocols simply for end users, to instead make these protocols for teams.
At the end of the day these systems are complex, so while Bao may have its own platform where anyone can create synthetics or nests, it is likely not easy for one person to do.
So Bao’s focus should likely be on building tools that allow any team to easily deploy their own synthetics and nests in a way that uses the Bao ecosystem.
2) Proposing changes to Governance and Reward Staking (veBAO)
At current our governance model is innovative but simple. It uses a score of Bao, locked Bao and Bao LP to get a governance score.
As we start to think about how to restructure governance, I wanted to make a proposal that staking rewards (tokens from the other protocols plus tokens the Bao platform generates from use) should be distributed in a way that is merged with a governance score.
There are also many new things we’d want to add to that governance score. So the proposal is to use a design similar to veCRV called veBAO.
veBAO is generated when you stake up the Bao token. The veBAO token is a non-transferable token, and the amount you earn will be based on a few factors:
- How many years you choose to lock in the stake.
- How many locked Bao you have from farming.
- A bonus % for being an original Bao user.
- A bonus % for having voted in Bao governance in the first 6 months.
- A bonus % for each of the collectible NFTs you hold (still to be issued).
- A bonus % for each of the franchises you’ve used/have locked assets in.
- The amount of Bao/ETH LP tokens you have.
Similar to our current voting contract, all this math would happen and give you a number of veBAO that you own (it is basically a point score of how much you use the Bao ecosystem)
This number would determine your governance voting power and the amount of staking rewards you earn.
3) Staking Rewards:
One thing we learned is that the model of governance franchises having a proportional share of the token locked in a vault for Bao holders is complicated and not obvious to the Bao holders but we needed a better way to distribute this rather than an airdrop, and not wanting to sell the tokens as they are a governance token.
For this we came up with the idea of staking rewards. Using your veBAO score, on mainnet you’ll be able to claim a share of each of the governance tokens and other rewards dripped out over time.
This way users can actually get their hands on these governance tokens to take part more directly in governance or use them on the platforms for their redeemable use cases like creating Nests.
4) Adjustments to Unlocking
When we designed the unlock curve we expected to have progressed a lot faster towards hard synths and did not have planned the veBAO and Staking Rewards.
Those two changes would mean that the faster locked Bao unlocks, it actually makes it dilute the governance and staking scores of locked Bao users faster than anyone else.
With more than 750M Bao set to unlock each day after the one year mark users would be quick to lock them as veBao for higher total scores than when they were locked the first time.
To prevent this and better flatten the dilution we should push back the
lockToBlock by quite a lot.
This was something that did not seem a good idea at the time when locked Bao holders got no rewards and little governance participation. With the change of veBAO users would actually get a high rate of rewards for their locked Bao and so slowing the dilution is helpful to them as well.
Instead of having a fixed number of years for the unlock of locked Bao this proposal would set it to a high number to start (something like 50) and then adjust the number up or down on a recurring basis so that the dilution targets roughly 75% of the Bao that gets used that year in Bao products.
This way Bao is slowly deflationary as a governance token, but long term farmers still get rewards, combat inflation, and get staking rewards and governance bonuses that are not available to other users.
5) Ending Mainnet Farming of Current Pools
This would propose that we end the mainnet farming of the current pools as they continue to give out rewards to mostly empty pools who do not add much value to the ecosystem.
Instead we will work on setting up mainnet pools that will reward hard synths once those are ready, and the remaining Bao able to be farmed under the hard cap will be for those.
6) Last Primary Franchise
The governance franchise model has worked well for testing products that we needed to test without being risk to the main Bao ecosystem. But, they have been a bit confusing for users.
Moving forward the Bao community itself will not create new franchises, instead any new products would just incorporate the existing tokens (Bao on mainnet/L2s, Panda on BSC, Polly on Polygon)
But as we shift to making our tools be ones that other teams can use, we will still launch a governance franchise when in partnership with another team. Basically, they would use Bao tech to launch their project and its own token, but a certain amount of the token would have to go to veBAO stakers as a reward for this. We have one possible potential for this already that could be interesting.
This will help simplify things and now that we are done the tests of cross chain and soft synths, the focus is on having Bao be useful.
7) Prioritizing Hard Synths on either Mainnet or L2
We are getting close to having ready a pilot of hard synths and I am proposing focusing the community resources on getting this finalized and live before anything else in our ecosystem.
It may still be a few months before it is ready with a polished front end, but we have code in testing that allows for synthetics to be made and managed with multiple types of collateral.
Unlike the existing competitors who have a separate vault for each position, Bao has a way for you to use multiple collateral types in one vault.
Instead of using a simple collateralization factor like other protocols, the Bao synths calculate collateral value on a curve, where there is a base factor, but the more of a single asset you use the lower its collateral factor becomes.
This means the protocol auto balances liquidation risk if it gets too heavy in a single asset.
The plan would be to launch this on mainnet and L2s, it just unclear to start which launch would be first. We will need to monitor a number of factors.
After the hard synths are launched, we would then devote resources to ensuring the existing sidechain deployments get additional attention and upgrades.
These are all just some proposals being worked on that I hope to include in voting as part of a large ‘annual roadmap’ BIP which would combine our year plan with some other governance clean-up tasks.
The inner details need to be worked out but given all the things we’ve learned and achieved this year, I think this roadmap could set the Bao community up really well for having the full vision of our useful decentralized products even before the new year starts.
Let me hear any feedback you have or things you think we should include in an annual roadmap BIP.
- Migrate Bao to new version
The Bao token max cap has too many tokens to work with the detailed math of the current veBAO contract model.
In order to adjust for this we would need to migrate to a new token contract for BAO that would perform a unit split at ratio of 10:1.
Users would have the same percentage amount of total Bao but the units would be smaller.
This may not be required as we could make changes to veBao’s contract instead but it would be ideal.
- Begin to implement Governor Alpha
This would implement Compounds Governor Alpha and begin to give it control over the various ecosystem contracts one by one.
This would allow for onchain proposals and voting to be directed by any user who reaches a voting threshold.
This is the next major decentralization step in the long term goal of dissolving any official team and having all aspects run by the community through self-organized galaxies.