Hi guys, i would like to potentially start a discussion around sovryns tokenomics. We are diluting at an unbelievable rate. Every other friday rewards are paid out to the detriment of holders. Looking at the chart on the sovryn dapp might lead to me being put on anti depressants. I know a sizeable supply is wanted as it will promote decentralisation. However on most votes in the bitocracy I believe its pretty clear that only a couple of wallets make all the decisions and my vote counts for nothing. I love the idea of sovryn and what it is trying to achieve. However i think we face an almost insurmountable battle with rsk/sovryn adoption and a long few years in the works before the dapp is what people wish price represented at 100k sats and upwards. I do not wish to exit sovryn for fear of my non staked sov bleeding sats for the next 2 or 3 years before we have a the scalability and speed of roll ups with the potential adoption that comes following the ability to trade with the ease of a cex on a bitcoin secured dex. With that in mind i would like to propose the idea of a token burn (all new tokens are currently doing is hurting holders, particularly smaller wallets whos vote means nothing) or at the very least a considerable reduction in rewards to non stakers. Furthermore in the recent community call there was talks of the new fundraising round. I think some clarity on the prices being bought at should be given to the community. As currently my gut tells me that those with knowledge of the sale, if it is at a cheaper price have offloaded there holdings onto us as they know they will be buying back at sub market prices, which tbh will be the nail in the coffin for me. Thanks for consideration. The other idea i have had which i do not know if it is possible to implement, is no token burn but in order to earn rewards from liquidity mining you must have a certain amount of sov staked. Aa hopefully this would reduce the friday sell offs/supply
I fully support this proposal!
The other idea I have considered, which i do not know if it is possible. Is to keep the rewards going with no token burn. However to only allow rewards to be paid out to liquidity miners if they have a certain amount of sov staked? Hope this isnt stupid idea. Thanks
Token Burn was proposed before in the forum, people didn’t like the idea of the burning mechanism.
Ah i see, sorry to bring a post of the same about. What do you think of this, perhaps instead of token burn as people do not like this rewards paid out in sovryn to liquidity miners that is maxed staked in the bitcracy. Thus decentralizing voting power and stopping sell offs?
No worries man.
What i think is, token burn or token lockup to infinity and beyond is necessary. Dont get me wrong, I agree with all your points. Emissions are killing us softly everyday.
Whether what you suggest is possible to happen its a different story with many parameters. If you manage to gather enough VP for changing tokemomics tho, you have my support.
Concerns around tokenomics are valid, but I personally do not think any viable solution has been proposed, yet. But these convos are great to get the ball moving.
Regarding a token burn, it’s not that simple. Not only does a burn potentially cause more centralization, but you can’t just burn tokens and price magically increases. My understanding of a burn (correct me if I am wrong) is it works because you’re buying tokens off the open-market (therefore increasing price) then burning them indicating to the market they can never be sold back. So it’s not the burn that increases the price, it’s the first step of buying the tokens at spot market. In order to buy tokens in the first place you need cash. The cash could come from fees generated by platform (like Ethereum’s EIP1559 or Binance’s burn) but that requires us to be generating fees from users which right now we’re not really doing. Alternatively, we could just use the cash from our balance sheet on Exchequer and buy-back tokens, but doing that we risk bankrupting the treasury and we run the risk of it not even working to increase SOV price (a double whammy). We could as some have proposed just burn Exchequer SOV tokens, but that does nothing except kill our SOV stash for future use. It likely also has no actual benefit since no tokens were purchased off the market; we instead just burned our already owned assets which weren’t on the market. Overall, I personally am not comfortable using Exchequer balance sheet funds to buy back tokens or burn tokens simply because we don’t have that kind of excessive capital sitting around. It’s of paramount importance that we ensure we have run-rate in treasury for at least several years to buy us enough time to get on roll-up (plus growing pains switching over) and core primitives released while taking care of staff and actual protocol building. While treasury is healthy, I wouldn’t call it excessively rich either. The intent of the fund-raise is to buy time to get through bear market and bridge us through the buidl gap.
The most obvious (but hard to execute) solution is to build products that people will use and therefore generate fees. The foundation of the protocol was built properly by linking SOV token directly to revenue and then basis staking on the quadratic time-lock voting power mechanism. If we can increase the revenue then that is the rising tide that raises all ships. It makes stakers happy, which creates more buying power of SOV token, which makes the SOV treasury wealthier as well. If we cannot generate revenue then to be blunt, the protocol is dead in the water. At this point, Sovryn needs to be built as a value play with real fundamental use and not a hopium moon-token. It’s the only way to win the mind-share of Bitcoiner’s.
This is why Zero is great. It’s an actual product that virtually every Bitcoiner will at least be intrigued by, whether they admit it or not. Similarly, Perpetual swaps (despite being on BSC) where you can solely use Bitcoin as collateral and gas for all other trading is amazing. If a Bitcoiner wants to trade, they’ll want to do it using the Bitcoin based collateral Perps platform.
Ultimately, this is why the focus is trying to be what products can we create that Bitcoiner’s would actually use and therefore generate fees. It’s all about the fees & the revenue (and not yet about the marketing imo). If we answer and execute the revenue questions, all concerns will be alleviated. All easier said than done.
we should run operation BETTR, people can gamble and the protocol can get some fees like a casino were sovryn stakers are the house.
gambling business is a good revenue source for governments, we can learn from this. maybe once origins is set up and running.
Since you mention the health of the treasury, I would like to take this opportunity to ask you the following question.
In the last few days, several people have raised concerns about the way in which the team members who work every day to make Sovryn bigger are being paid. They have doubts whether they are receiving their remuneration in sov. And as its value is decreasing, maybe they need to sell more sov to the market to get another currency they want. They are concerned that this increases the supply of sov and lowers its price.
Personally I am more concerned about keeping the entire Sovryn team happy than the price of sov. So I ask you: Is there budget (sov, btc, xusd…) to pay the team regardless of whether the value of sov continues to fall in the coming months?
It’s my understanding that team members can opt to get paid in SOV or dollars. However, I believe most get paid in dollars. Further, AFAIK Exchequer is not selling SOV into the market to fund our budget and I doubt any contributors selling SOV into the market from their compensation is having any major impact on price. So I think this is FUD on the price more so than anything. I don’t have concrete data to back that up, but it’s my based on my understanding of the budget and compensation break-downs.
Our budget is primarily held in Bitcoin and based on the current price, we should have plenty run-way to pay team regardless of whether SOV value continues to fall. However, we probably couldn’t sustain that if we had to do it for a multi-year bear market and were unable to raise funds. Unfortunately if any new funding round does close (which I know we’re close and working) it is going to be a down-round versus what Pomp and others invested in. The reality is it’s worth it imo.
Thank you very much for your answer, because I think you have first-hand information.
It gives me great peace of mind that the core team has a guaranteed salary.
I have no doubt that bitcoin will do its part.