AIP-01: Tokenomics Overhaul

Aladdin Improvement Proposals
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The Aladdin core contributors propose a major overhaul to the Aladdin tokenomics and vault system, aiming to connect the tremendous value created by the Boule Council to our native token, $ALD, by optimizing the tokenomics system for building protocol-controlled value (PCV) and managing the treasury such that ALD’s value trades in relation to the growth potential of the DAO’s diverse treasury assets and the Boule-developed yield strategies that utilize them.

Overview

Under this proposal, Aladdin will no longer mint ALD tokens on a fixed schedule, but will instead acquire assets for its treasury via a bonding mechanism and then only mint ALD tokens against protocol profit from these bond sales. Assets received into the treasury will be deployed in a transparent way to turn the treasury into a portfolio of Aladdin-selected protocol tokens and LP positions, balanced with a healthy stablecoin/ETH/BTC component. ALD tokens minted against profit from bond sales will be distributed to stakers, with a portion being diverted to the DAO.

Once a user obtains ALD tokens, they can be staked in the Aladdin staking contract to enjoy great returns in ALD terms, and to prevent dilution during Aladdin’s high growth phase when more new ALD tokens are minted from bond sales. The net result: ALD becomes a token which represents the value created by the Boule Council, and also becomes a low-gas low-complexity way for the Aladdin community to gain exposure to Aladdin’s portfolio of amazing DeFi protocols and strategies. The community can play along with Aladdin on Easy Mode with the ALD token!

Implementation Details

Bonding

There will be three ways for users to get ALD token, designed to appeal to participants with different risk profiles:

  1. Users with a high risk tolerance can directly bond assets like stables, BTC, and ETH
  2. Users with a neutral risk tolerance can market buy ALD and stake it
  3. Users with a lower risk tolerance can gain ALD token via Aladdin vaults which will continue to be offered for compatible Aladdin-selected projects, but will automatically bond 100% of the underlying reward for ALD

Staking

A staking mechanism that uses rebasing to distribute rewards in a gasless way will be implemented, with the protocol initially targeting 0.3% staking ROI per 24h epoch, for an APY of about 300%. This will provide a very strong incentive for users to buy and stake as early as possible, and will reward our earliest community members well, while still incentivizing new participants in an ongoing way. Very high community staking participation will be crucial to supporting ALD price especially during the growth phase. Staking ROI targets will be reduced over time as the treasury backing the ALD token grows, and as the Aladdin model is proven, with the plan to eventually target a consistent premium for ALD price over treasury backing.

How does this support Aladdin’s mission?

It is useful to put this proposal in the context of Aladdin’s overarching goals. The ALD token is crucial to fuel the Aladdin ecosystem, however it is not the whole point of the project. A well functioning ALD tokenomic system aligns participants as we work toward our mission of providing all users, but especially retail participants, education about and access to the best DeFi opportunities. Achieving this mission also supports the DeFi ecosystem as more of the community’s capital is directed to these worthy projects, minimizing the amount of capital lost to low quality or otherwise scammy projects.

The new model produces a number of powerfully beneficial outcomes that support the Aladdin mission that have not already been mentioned:

  1. Boule Council Freedom

Under the previous approach, only very specific types of farms were compatible with the Aladdin vault system; under the new one the Boule Council can now suggest any arbitrary opportunity. Assets will be deployed directly on the back end, and public announcement of the selection will still occur on the front end.

  1. Aladdin is a diamond-hand hodler

Capital will now be deployed to selected farm tokens or LPs directly by the DAO, allowing Aladdin to be a highly valuable partner and better supporting selected protocols. Gaining community trust in this respect may create opportunities for future partnerships with listed protocols.

  1. Education via Open Source Treasury Management

Being truly open and transparent throughout the process of proposing, debating, and selecting DeFi opportunities, but then also about sizing exposure and being diversified with stable options, creates an unprecedented behind-the-scenes view to help new investors understand considerations in managing a portfolio, end-to-end. This is much more valuable than simply highlighting individual farm opportunities

Why is a change needed?

When Aladdin was first launched, the initial focus was in assembling a powerhouse team of DeFi Big Brains to form the Boule Council, which is the main engine that generates value for the Aladdin community. Aladdin issued its ALD governance/utility token that was to be used to vote for the initial Boule Council as well as incentivize users of the platform (both Boule Council as well as farmers). A highly aggressive liquidity mining program was launched to distribute ALD widely to the community in preparation for the initial Boule Council voting period, but unfortunately the result of this program, as with many similar programs, was a serious drop in token price. It is clear that a stronger value narrative and capture mechanism is needed to support the token price so that the token in turn can support the Aladdin incentive mechanisms.

Despite token price headwinds, the Boule Council research meetings have been an incredible success, and have really proven the value of the core Aladdin model. Through the course of these public calls, members of the council have proposed and debated, then ultimately voted on amazing DeFi opportunities for inclusion into the Aladdin ecosystem. Tremendous value has been created and shared freely through which the community has gained not only great guidance as to which farms they might consider investing in, but also insight into how the big brains select farms and what kinds of questions they ask.

Final Thoughts

The team is incredibly excited about this new mechanism because we think it will create excellent alignment in economic incentives between all participants in the system, while still allowing Aladdin to freely share valuable information and incredible opportunities with the community. No secret handshake required! ALD token holding/staking additionally provides a tangible value and allows participation from users who might be otherwise priced out by the multiple mainnet transactions required for farming. There are many aspects of this model that have yet to be explored and a few details to be worked out, but we would be very grateful for feedback from the community!

Please vote below to give a preliminary indication of whether you like this or not, and as always jump in with any questions or comments you have!

  • Love it! Let’s do it!
  • Don’t Love It… See my comments below

0 voters

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This is great idea in that it perfectly fits the nature of Aladdin!

I’ve got 1 thing to discuss. As far as i know, $ALD circulation assigned to boule plus staking is approximately 24M. (for 4 years) What do you think about these $ALD also following “Bonding” context? Boule plus staking has different mechanism compared to other staking method, but it would help “Bonding” strategy to better function its purpose.

(cc. @crouguer)

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I strongly support the proposal. Ald should be the equivalent of Berkshire. So it’s quite necessary for Ald to become an asset controlled protocol. Pure governance token lacks value of capture.

If there is a way to incentive long term holders of Ald. There should be a method of buying Ald at a discounted price also burning Ald at a premium price redeeming the underlying portfolio, which eventually benefit the diamond hand holders. This could be seen as a progressive mechanism to the OHM.

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This is great idea :rocket:

For more accurate understanding, is my below summary correct?

-ALD Stakers Incentives

For those ALD holders who stakes ALD to AladdinDAO,

1.they can gain LP incentives by POL model (Reference: Bonding as a Service by Olympus DAO)

2.they can gain investment return revenue share of ALD Community Treasury. These community treasury asset management led by Boule and Boule Plus

Considering No2, if my understanding is correct, since we require staking for Boule Plus, so, we should also require staking for Boule, too. Similar to DPoS concept on BaaS. What do you think?

Also, it’s better to set asset allocation for Boule and Boule Plus Separately in advance. Let’s say 70%:30% of Community Treasury for example. I suppose that Boule Plus asset management model will be more dynamic than Boule one because we always have new DeFi Big Brains from our community. Thus, smaller allocation than Boule will be better for risk management. What do you think?

Also, one more additional suggestion. We take auto burning mechanism on No.2. Let’s say 20% of investment return of Community Treasury Asset Management. We use this 20% of investment return to buy back ALD from exchange, and burn them automatically. This brings deflationary economy effect on ALD. So, we can expect sustainable asset value growth on ALD.

Here is the network effect like below:

Smarter boule and boule plus, more return for ALD holders & more ALD burns, thus, more people wanna buy ALD for staking, but, less ALD supply for exchange. Eventually, natural asset value growth on ALD.

I like this network effect :grinning_face_with_smiling_eyes:

Any thought?

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Thanks @ALD_WHALE for your consistent support and great feedback!

The ALD incentives for boule plus members are a priority for the protocol, especially since there are a lot of great ideas floating around for ways that we could expand Boule Plus in the future, and also maybe other types of benefits and rewards to boule plus membership.

In addition to boule plus, if you look at the current emission schedule there are also allocations for the boule council, and for contributors. So all three of those allocations need a source for ALD tokens under the new emission system, and these details haven’t been finalized in the current proposal.

One option is that the ALD held in the treasury could be staked, and then treasury ALD staking rewards could be the source for those allocations, such that they continue under a similar schedule. Alternatively, we could also consider minting ALD for those other allocations directly in the bonding process. There are trade-offs there. We’re thinking about them but we’re always keen to hear other ideas or feedback. Keep it coming!

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Cool, thanks for leaving that comment @forgivener! I’m on the same page as you for sure… the more I think about it, the more it seems that Aladdin can take the idea of PCV and really push it further than it has been before. We can use PCV as a giant lever to capture and direct the value of the boule council toward our goals.

On the subject of a mechanism for burning ALD and redeeming the underlying portfolio, this is something we talked about a lot early on, but seemed to have some disadvantages. For starters, it is harder to deploy the capital from the treasury to boule council yield farms if it also has to be available at any time for ALD burning/redeeming mechanism. A big part of the idea for our treasury management is that rather than just holding tokens of selected protocols, Aladdin would actually farm them, or deploy some fraction of them to a pool2 as a way of supporting those protocols with Aladdin diamond hands and earning fees/rewards. Additionally, during the early bootstrapping phase while the treasury is being built, the actual treasury backing will be quite low, so it wouldn’t be an attractive option until after the the system has been running for awhile.

I think there is a lot of room for discussing how the mechanism should work once we get past the early bootstrap phase. Obviously as time goes on and the treasury expands, the high APY staking pool should slowly have its yield lowered. I like the idea of some kind of buyback or redeeming mechanism once we start to get close to some target premium of market cap over the treasury value, but I bet there are other possibilities we haven’t thought of yet…

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Thanks @mr.masa! The other contributors and myself really appreciate your very thoughtful posts.

To clarify, in this model we propose, ALD stakers would be given a fixed return (in ALD terms) on their staked amount, currently we’re thinking 0.3% per 24h epoch. The ALD to pay this rate is minted during the bonding process to support this, using some parameters we are still discussing which define what the protocol profit is for a given bond sale. This would be true no matter how the user acquired their ALD… if ALD is staked, it receives that reward via a rebasing mechanism. This approach allows early users to lock in a share of the Aladdin pie and protects them from ALD dilution as more ALD is minted in the bonding process.

The idea of the bonding approach is to maximize the assets in the Aladdin treasury so they can be directly deployed to Boule Council selected protocols. It’s a bit confusing because we do propose to still offer vaults, but they are functionally a little different than before. Risk-on users can directly bond their ETH/BTC/stables to get discounted ALD. More risk-averse users can instead deposit into Aladdin vaults where they retain custody of their principal in whatever the vault underlying token represents, but the rewards on that underlying deposit are captured (100%) by Aladdin and used as payment for ALD bonds. Using a vault is the equivalent of a farmer buying a bond directly with their farmed reward token, but it happens automatically and in an ongoing way.

The idea we propose is that we will not sharing revenue, but instead the ALD token will simply trade higher as the treasury grows, since ALD represents membership/ownership of the DAO and its treasury. All rewards, fee revenue, and gains associated with assets owned by the treasury will stay in the treasury to allow it to continue to grow, and the idea is ALD price moves in relation to this growth. Eventually I imagine we will want to target some kind of reasonable premium for the ALD market cap over the treasury value (see my above reply to forgivener) so I’m guessing that buybacks and other similar mechanisms will be part of that discussion.

Right now the proposal idea is that staking for boule plus would be separate from staking for a share of newly minted ALD. Boule plus are going to be receiving quite significant allocation of ALD tokens based on their voting record and we’re thinking they shouldn’t also get staking yield… but please comment if you disagree. The downside for boule plus members is those 5000 tokens would be diluted over time since they’re not rebased as part of the staking payouts. It becomes a game for boule plus: are you clever enough to earn more from your voting record in boule plus than just from staking rewards?? In the beginning it will be easy because there are so many tokens allocated to boule plus. As membership grows, it will be tougher! There is still internal discussion and disagreement about this idea…any feedback the community has here would be great!

Finally, I’m with you on deflationary economics, and I’d love ALD to get there. I think our big challenge right now is establishing treasury backing even though there already significant ALD tokens in the wild… so imo the first job I think is to maximize value capture to the treasury at full speed. Using an ongoing buyback (and burn?) is I think a good mechanism to think about once the treasury is more established and the ald token trades at a reasonable premium over the community tresaury, but that’s just my opinion.

Does that make sense to you? Do you disagree?

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I’m glad $ALD assigned to boule / boule plus / contributor allocations also being considered via new economic context. It seems integrity of this new model is very important. Thanks for detailed infos!

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This is great idea.

1. Regarding Boule Plus allocation

If the Boule plus reward does not depend on bond sales and the fixed amount will be guaranteed as it is now, there is no need to get staking yield.

Then it’s fair, and it’s up to people to choose between staking yield or Boule plus reward.

However, if the amount of rewards will be changed variably by the new tokenomics, the previously promised rewards should be paid to Bouleplus before starting new tokenomics as the new vault is expected to be listed after the new Tokenomics.

Then it’s also fair again.

Not because of integration, but because of new tokenomics, listing on aladdin is being completely delayed. and ofcourse Boule Plus are not getting even a penny.

Boule Plus deserve that. They have been staking ALD for more than a month without penny. In addition, it takes two weeks to unlock.

And you have to notify them that the reward will be change and Boule plus also will be restarted with new tokenomics.

2. Regarding Contributor allocation

If there is already a enough amount of ALD in the treasure and multisig wallets, the ALD assigned to the contributor can be staked.

After that, it’s the same as now. For example, there is a distributor called A. and it is promised to receive 100ALD per month for 4 years.
Then you can stake 4,800 ALD for him and unlock 100 pieces a month

This will not change the amount and duration of the originally promised allocation, and will also receive additional staking yields.

just stake ALDDAO, and ALD will be unlocked for four years as it is now, and contributor will get also staking yield just like ALD staking on new tokenomics.

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Thanks for reply! @crouguer

I understood the background of your idea around 90% :slight_smile:

Eventually I imagine we will want to target some kind of reasonable premium for the ALD market cap over the treasury value.

Yes, I totally agree with you. This should be our KPI: How much more premium we can create on our treasury value.

This premium tells us our asset value growth is overwhelming our treasury value growth. This premium verify our intrinsic value of Boule and Boule Plus, which means Decentralized Berkshire, the core of Aladdin DAO :slight_smile:

Then, I’d like to discuss with you about your below idea again.

  1. Users with a high risk tolerance can directly bond assets like stables, BTC, and ETH
  2. Users with a neutral risk tolerance can market buy ALD and stake it
  3. Users with a lower risk tolerance can gain ALD token via Aladdin vaults which will continue to be offered for compatible Aladdin-selected projects, but will automatically bond 100% of the underlying reward for ALD

I understand that we are trying to build an advanced model of OHM. From that perspective, I think we should focus on No.1. I think OHM high staking return model is not sustainable from token economy perspective. Instead, POL by Bonding on OHM is great innovation. Let’s build more advanced one on Aladdin DAO :slight_smile:

One of the key points will be how we can motivate bonders to stake their discounted ALDs, so that we can achieve higher POL. Your current APY target is 0.3% staking ROI per 24h epoch, for an APY of about 300%. This is good target number.

Then, I also think Boule Plus should be integrated to this new token economics because designing well the combination of Boule and Boule Plus model verifies our product concept of Aladdin DAO: Decentralized Berkshire :slight_smile:

So, I think we should apply tailored incentive mechanism for both Boule and Boule Plus to achieve this 300% APY.

Stakers receives ALD for this 300% APY return, which is good. Here, also we can set 2.5x boosted CRV rewards model on Curve. So, larger stakers can gain larger APY allocation, which will motivate bonders to take larger ALD allocation for staking.

But, to verify our premium on treasury asset value, the mission of Boule and Boule Plus is to meet this APY target with our portfolio of Aladdin-selected protocol tokens and LP positions.

If we can achieve higher APY than the above 300% target, Boule and Boule Plus should get some bonus incentives based on like reward tables.

If we cannot achieve this APY target, we buy back ALDs from market by using our treasury, we use this ALDs to supplement the loss.

So that, we don’t need No.2 And No.3. To stimulate retail investor’s ALD demand economy, we can take No.2 option as OHM does in our initial stage, but, we should continuously focus on to achieve this formula No.1 > No.2 simply because again I think No.2 > No.1 is not sustainable from token economy perspective. Especially, I think we don’t need No.3.

Then, about Boule Plus integration to this new token economy, again I think we should require both Boule and Boule Plus to take their ALD staking.

Here is my idea. As usual, we take staking model like PoS (Proof of Stake) for reward mechanism. Thus, minimum staking requirement should be also set

Base reward rule to achieve 300% APY target: for example, 20% of investment return on our portfolio. Larger staker can gain larger allocation of total rewards.

Bonus reward rule to achieve higher 300% APY: we should apply performance based to motivate Boule and Boule Plus to contribute seriously. For example, we analyze best performing protocols and which Boule and Boule Plus supported this allocation. These Boule and Boule Plus can get larger allocation from bonus rewards pool. This rewards pool comes from the investment return of our treasury asset allocation.

So, the above ALD staking pool by Boule and Boule Plus will be used for ALD buy back program when we cannot meet 300% APY target. This game rule is a bit similar to Slashing on PoS.

With the above model, I think we need some mathmatical formula to simulate target adjustment between staking reward target (300% APY as of now) and our treasury management investment target because if our APY target (300% as of now) is too high, Boule and Boule Plus lose lots of their ALDs… That’s sad…They will lose their motivation to join Boule and Boule Plus.

Please give me your feedback!

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Thanks @mr.masa Sorry I slept on this for so long.

I think you and I are on the same page, mostly. A few comments:

You got it 100% right that we need to motivate strong-handed staking… We’re discussing internally whether a timelock or just a vesting period would be best. Also, as an aside 300% is actually the minimum APY a staker would receive, if less than 100% of circulating ALD tokens are staked then that number will be higher. So in the beginning, it will probably be a lot higher.

I agree that the boule and boule plus reward structure need some attention, for sure. However we have been thinking that it might be wise to separate those changes from the basics of the bond/stake/rebase structure of the tokenomic upgrade. The idea would be to get this approved and built out first, since we think there are options to address those questions within the new structure as defined. So… stay tuned and we will discuss more in a different forum post :slight_smile:

The way this mechanism works overall is surprisingly subtle. I think it’s actually quite important that users can buy and stake, because healthy demand in the secondary market (i.e. Uniswap) is required in order to make the bond sale price attractive. And of course, you are right that selling bonds is the main behaviour we want to encourage. The bonding curve price model we are looking at prices bonds using the total supply of ALD and the treasury reserve, with a fixed connector weight (based on bonding curve work by Bancor in 2016) so buying and staking on secondary market is important to incentivize bond sales. I tend to agree with you that the vault system (number 3) of auto-bonding rewards is probably not the most important part, but it does provide a nice alternative for users to use to play along without risking their capital. Ultimately it’s bonding as well, which is good for the treasury.

These nitty gritty details are tough to work through on the forum, so I’m sure I’ve messed up answering your questions! Feel free to DM me and I will try to provide more!

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In the voting interface, you can see that each ordinary user holds no more than 100,000 ALDs. In this case, no matter what you do is very stupid (as long as the income settlement is still on Ethereum). Before migrating various functions to other public chains

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Now I fully understand your idea. Perfectly agreed :slight_smile: I was also just thinking about to implement Boule and Boule Plus incentive mechanism later because it requires more discussion to settle the product requirement. Thanks for reply :slight_smile:

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