Summary
As an ALD holder and customer of Clever/Concentrator products, I propose the following improvements to ALD’s tokenomics to generate additional value for ALD holders and fund further growth of the Aladdin Dao ecosystem:
Apply the Curve Gauge voting for ALD/ETH, and spend the 30% of income from Clever and Concentrator protocol for Gauge weight voting
Reduce the Staking APY from around 10% to 5%. And keep that saved 5% ALD emission as ALD ecosystem investment fund.
Enable VexALD, and Clarify the benefit of VexALD
Publish the Bi-monthly/Quarterly financial report and list all the income and expenses.
Motivation
The long-term undervaluation of ALD limits Aladdin Dao’s ability to fund new growth initiatives. I believe the proposed changes to ALD’s tokenomics structure will optimize it as an investment vehicle for the entire ecosystem. By pursuing additional income streams, making strategic investments, and improving transparency through reporting, Aladdin Dao can attract the funding and market recognition it deserves.
Detail Proposal which is open to discuss
Apply the Curve Gauge voting for ALD/ETH, and spend the 30% of income from Clever and Concentrator protocol for Gauge weight voting.
The Curve gauge voting process for the ALD/ETH pool would be similar to listing ALD on a major cryptocurrency exchange. It represents a great opportunity to attract more new interest to ALD, which I believe Aladdin Dao deserves.(https://twitter.com/taowang1/status/1616917945401356289) Using a portion of treasury income(30%) for gauge weight voting would also help improve liquidity and provide ALD holders who do not want to lock their tokens for 4 years with a positive income stream. Additionally, a new ALD/ETH vault within Concentrator could give ALD holders another yield-generating option by depositing their tokens in that vault.
Reduce the Staking APY from around 10% to 5%. And allocate the 5% ALD emission as an ALD ecosystem investment fund. The investment fund can be utilized for:
• Buying back CLEV or CTR tokens once their prices become undervalued. Newly purchased
CLEV/CTR tokens could then be permanently locked to generate passive income.
• Incubating new in-house protocols by providing more ETH funding, to accelerate their growth.
• Investing in new protocols during pre-seed or seed rounds, such as the Prisma Project.
• Building an in-house arbitrage and market making team to operate within the Aladdin ecosystem.
Enable VexALD tokens and outline their benefits, which could include:
• Free airdrops of new in-house protocol tokens as they are developed
• Investing excess revenue from Clever and Concentrator within the Aladdin ecosystem during bear markets
• Distributing dividends to VexALD holders from time to time
• Offering lending options to VexALD holders to access funds if needed
Publish bi-monthly or quarterly financial reports that break down all income and expenses in detail.
Providing transparency through regular financial reporting will build long-term trust between the team and ALD holders. Clear communication of how revenues are being generated and allocated will demonstrate proper stewardship of ALD holders’ investments.
Reason I invested in ALD and staked it, what seems ages ago now…, was that was that I liked the idea of an easy set and forget investment in crypto, let the big brains of defi handle the tough stuff for you in their own version of crypto Berkshire Hathaway, whats not to like! I was also attracted by the fact the early investers could get very high rebase +200% APY (Ha! for few days anyway…) and a sweet bonding deal(Ha!, bad timing i guess). I liked the fact that my xALD was not locked for a long periode, I could always sell them if I needed to.
I think that if the plan still is to get noobs like me to invest in ALD (and I dont know if that is the idea now) then it should be pretty simple to buy and stake ALD. Not so simle in first place, and not sure I think ve-locking xALD makes things simpler or more attractive for noobs. Why not pay revenue from CTR and CLev, dividens and so on, to xALD holders, and maybe even pay initial revs based on how long you owned your xALD? Keep the rebase up/higher I think it attracts (some) investers.
Cool that the new projects get very sophisticated, some things are way over my head, but I really think you should keep things simple with ALD. That is if the plan still is to be the Berkshire Hathaway for the ordinary small Joes. And an other thing, the team/people in here are so sophisticated and clever in defi that you often forget that many of you future customers does not find defi that easy and frictionless. Sometimes I really think some kind of low key PR would be great for ALD. I mean it is kind of nerdy in here/on twitter, in a good way!, but you dont really reach out noob crypto investers that way.
Anyways glad I invested in ALD, an happy to be here, just my thoughts of ALD. And this is written without me meaning anything negative./AldOG
I agree that a part of the protocol income should be applied for curve gauge voting.
And, I like the synergy of utilizing concentrators to maximize ALD/ETH yields.
However, I think this option is for advanced users.
In other words, as @AldOG says, there should be a mechanism to buy back ALD with a part of the protocol income and give it back to the staker (xALD holder).
This option is for beginners and is similar to buying Berkshire Hathaway stock and leaving the investment to the geniuses.
If protocol income alone is not sufficient, it will also be necessary to secure investment funds through ALD inflation.
I agree with the option of locking ALD (xALD) to receive incentives beyond staking.
I know Yearn Finance publishes quarterly, I would like to read Aladdin’s report as well.
One thing the community needs to understand is that the results of their investments are not immediate, so we should not be upset if the report shows a deficit in the short term.
Thanks Tao for your thoughtful and detailed suggestions. My layman’s first reactions:
Curve gauge voting for ALD/ETH
I like this idea, it seems a good way to generate awareness for ALD and incentivize liquidity providers for ALD/ETH; also support the Concentrator integration
Reduce ALD staking APY from 10% to 5% to generate ecosystem liquidity
I agree those funds could be better deployed elsewhere
The challenge is electing where to deploy, and how to decide (DAO votes quarterly or something?)
I like: buying back ecosystem tokens and max locking them (CTR/CLEV/ALD)
I like: funding new internal protocol development
I don’t know: building an in-house arb/MM team focused on Aladdin ecosystem (how practical/valuable given the relatively small $ amount involved? I just don’t know)
I dislike: funding external protocol development (inconsistent with why I invest in ALD)
Enable VexALD (4yr locking), and clearly define benefits of VexALD
I also like this concept, which could be structured in various ways.
I like: airdrops of internally developed protocols (or lower new token price), higher yields if/when distributions paid to ALD holders
I like less: offering lending options to VexALD holders (either trade off liquidity for the benefits by ve-locking, or don’t - no “backdoor” liquidity, just my preference)
other benefits: I can imagine a marketing line like “in exchange for 4yr-locking your ALD, you receive amplified yield, preferred access to internal protocol launches, priority access to airdrops [if Aladdin gets airdrops from external protocols?] and other Aladdin ecosystem perks”
Publish regular reporting on ALD’s income and expenses
great idea; helps determine book value of ALD and transparency build trust between Aladdin and its community
Thanks @Tao for putting this initiative on the table. As also a user and holder of Aladdin Projects shares, i’m eager to see a change on the ALD tokenomics.
1- I agree getting ALD/ETH a gauge. However i’m not sure that bribing the pool with Ald revenues is a positive flywheel for the DAO. There is about 900k$ liquidity on Curve already, without any incentivization, bribing this pool should be in order to grow liquidity and not rewarding LPers which may not be linked to the successfull growth of the project.
1-b: I would also add a proposal to define how to best farm Aladdin DAO treasury and distribute a share of the resulting yield to the lockers.
2- I think Aladdin DAO should continue liquidity mining and use a share of it going to Lockers and the rest going to LPers by bribing on Curve so that LPers are still slightly incentivized but less thank lockers since they don’t take the locking risk.
3- As for FX protocol, why not thinking about a 80/20 ALD/ETH pool that can be ve-locked on Aladdin and for which lockers will receive a share of Aladdin DAO revenues?
4- Agree, would be really interesting to have a regular report. I think 2 per year is a good start at this state of the DAO.
1 - Yes, there is 900k $liquidity on curve without incentivization, but most of them are from Aladdin DAO treasury. If we get ALD/ETH a gauge and provide the proper amount incentive(vlCVX vote or bribing), we can use these Aladdin DAO treasury in other place. Also, we are providing ALD holder another way to farm their token if they don’t want to lock for 4 years.
2 - Agree. That’s why i say 30% go to LP and 70% go to lockers
3 - It sounds cool. Not sure ALD holder would prefer ve lock 80/20 ALD/ETH pool token or pure ALD. But again, it is big commitment in crypto world like @AldOG mention in his post.
Hey @Admiral Thanks for the detail reply
For 2, building an in-house Arb/MM team. The farming frequency of concentrator drop after the farming policy change. I do see some complains that their vault is not farming for over 2 weeks due to low TVL and high gas. I wish the in-house arb/mm team can help the ecosystem even without much earning. Customer don’t have to give up unharvested rewards.
For external protocol, i wish they can invest some awesome protocol in early stage within the curve ecosystem or DEFI in general. Something like Frax finance invest their gauge voting to exchange CLEV token.
For long term investors who don’t need a fixed income, buying ALD tokens and staking/locking veXALD is a good strategy to maximize revenue sharing from the protocol.
For long term investors who do need a fixed income, buying CLEV tokens and locking them up can provide weekly revenue distributions.
For short term investors, farming ALD/ETH pairs using a concentrator can be a good option to generate yield in the near term.
Overall, the ability to offer different yield generating strategies through tokens, staking, and farming is helpful to cater to the needs of different types of investors within the Aladdin DAO ecosystem. This allows investors to choose the option that best matches their risk tolerance, time horizon, and cash flow needs.
I calmly consider this idea again. If we decrease $ALD supply from 1B to 150M, I think we parallely need to set a backup plan to grow your treasury as Investment DAO because we give up $ALD as investment treasury in short-term. We don’t have “Geico” of Berkshire Hathaway yet, capital generation engine for token investment.
A key is how we can scale f(x) as fast as possible because the revenue is stETH, low risk asset in Web3. My long-term expectation for f(x) is to function like “Geico” of Berkshire Hathaway for Aladdin DAO. If f(x) goes to Stability Mode over one year in next bear cycle, f(x) cannot be “Geico”. Eventually, this $ALD supply reduction will make Aladdin DAO fail to scale. That’s very sad scenario which we want to avoid.
If we can pass my fee improvement proposal of f(x), I’ll support this idea because I believe Vol.4 Fee model will enable us to scale f(x) much faster in the next bear cycle.
For your reference, here is my Fee Vol.4 proposal of f(x).
I suggest you post thoughts about the cap reduction in the AIP-09 thread where we are talking about that specific change, see link at bottom.
But for now, one thing I notice in your posts is that you keep discussing what happens if f(x) “goes to Stability Mode” over a long period of time. I think that scenario is very unlikely. Let me explain:
In stability mode, rebalance pool capital is immediately redeemed to push the protocol out of stability mode, by pushing CR up. If there is sufficient capital in the stability pool, then stability mode is exited almost immediately. If all the capital in the rebalance pool is not enough to keep the protocol out of stability mode, then this implies that the leverage of xETH is > 4 (and its unit price has probably just dropped a lot), and the risk of the protocol “destabilizing” event is >0.1%, perhaps much greater (here I use ‘destabilize’ to describe xETH->0, and fETH reverting to beta=1 to stETH. It’s more correct to call it a spot reversion or something like that…)
In this situation I see it being less likely we get stuck, and more likely that either xETH gets minted (due to super high leverage, plus add’l minting bonuses coming online soon) or, in a catastrophic market, the protocol goes to full-spot-reversion and we have to recapitalize with FXN.
If I’m wrong and somehow the protocol did get “stuck” in stability mode, I would guess that the dao would have plenty of time to enact structure changes on an as-needed basis at that time. I don’t think that the DAO would just sit by for a year with minting disabled, it would be addressed very quickly.
What do you think?
And as always we appreciate you and your thoughtful contributions!
I truly hope so. But, in my sense of risk, things might not go as you expect.
Let’s take the example from the last ETH bear cycle. The attached is the price chart. As I marked in the orange rectangle, for 31 weeks in total, ETH price went down.
During this period, the market had small bull move only for 10 weeks.
Based on the above fact, if f(x) went live in the ETH last bear cycle, I think f(x) goes like this.
On the 1st bear move as I marked in the sky-blue rectangle, f(x) definitely goes Stability Mode simply because almost no one wants to buy xETH during this period. They think it’s too risky. Then, we use rebalance pool B ( I still doubt we can keep sufficient amount of fETH on this pool to recover CR > 130.6 in this 1st bear move) , and sell fETH and buy xETH. In a short period of time (I suppose around 10 weeks ), CR will recover higher than 130.6. But, the second bear move come again as I marked in the purple rectangle. f(x) goes to Stability Mode again. Then, we use rebalance pool B again ( I even more doubt here how many investors put their fETH into this pool B right after the 1st Stability Mode activation ) , and sell fETH and buy xETH again. But, most xETH investors will not buy after the orange rectangle. As I marked in the yellow rectangle, during these 25 weeks, a few investors start to buy xETH because most of them still skeptical if the ETH market bottom-out or not. Thus, f(x) will go to 3rd Stability Mode during this moment.
So, in total, I suppose we experience Stability Mode for three times in the market bear cycle. Then, how much TVL we can achieve during this moment? I think much smaller than that of the ETH bull cycle. Thus, most of fETH investor think like this: f(x) is not convenient to use as Stable Coin Protocol than DAI or FRAX. This is not what we wanna achieve.
Again, I suppose this recapitalization mode will cause the market catastrophes of FXN just like the below.
Recapitalization Mode Starts → Lots of investors dump $FXN because they know we sell $FXN and they consider this mode as f(x) is in serious danger → Even we sell $FXN, the price will be like $0.001 / FXN because of the dump (this is just the hypothetical number, but, it will happen as we experienced in LUNA Crush) → we can not gain sufficient amount of capital by selling $FXN → Eventually, f(x) protocol completely malfunctions → Investors start to dump xETH and fETH → TVL seriously went down → This might be game over of f(x) which we want to avoid
On the 1st bear move as I marked in the sky-blue rectangle, f(x) definitely goes Stability Mode simply because almost no one wants to buy xETH during this period. They think it’s too risky. Then, we use rebalance pool B ( I still doubt we can keep sufficient amount of fETH on this pool to recover CR > 130.6 in this 1st bear move) , and sell fETH and buy xETH. In a short period of time (I suppose around 10 weeks ), CR will recover higher than 130.6. But, the second bear move come again as I marked in the purple rectangle. f(x) goes to Stability Mode again. Then, we use rebalance pool B again ( I even more doubt here how many investors put their fETH into this pool B right after the 1st Stability Mode activation ) , and sell fETH and buy xETH again. But, most xETH investors will not buy after the orange rectangle. As I marked in the yellow rectangle, during these 25 weeks, a few investors start to buy xETH because most of them still skeptical if the ETH market bottom-out or not. Thus, f(x) will go to 3rd Stability Mode during this moment.
Hey Mr. Masa,
Couple points:
Rebalance pool B activates at the same time as rebalance pool A, and it uses fETH to MINT xETH, not buy it
The protocol will never stay in Stability Mode for longer than a few minutes, most likely, as the protocol is essentially going through a shrinking process. Once it is stabilized at 130, every thing is fine and it operates normally again. In a bear market there are still lots of opportunities to take long positions on rebounds and by utilizing xETH in various different ways. The protocol may go through several different stability mode cycles, but this is very healthy! It sizes itself to the market’s demand for the reserve asset. If the crypto marketcap drops by a factor of 5, so should f(x). Stability Mode shouldn’t be a scary thing and be avoided. It’s very healthy and makes the protocol very flexible to changing market conditions.
Long-term market bear cycle is the most important timing to scale f(x) . If the TVL shrinks with following the market bear move, the intrinsic value of f(x) goes down.
Then, to apply $ALD as L3 with EIP1559 model is the best wayl to raise the utility value of $ALD in the long-term.