FIP 09 - bFXN Buyback and Lock Program

f(x) Protocol Improvement Proposals
1

Abstract

bFXN is the upcoming governance token that will be issued on Base. This proposal offers to use a portion of the veFXN owned vebFXN revenue to continually buy bFXN from the market and permanently max lock it under the ownership of veFXN on mainnet.

Motivation

In January 2025, AladdinDAO released version 2.0 of f(x) Protocol. Version 2.0 was released on mainnet to allow users to trade ETH with fixed leverage via XPOSITIONS. While the mainnet launch has nearly doubled the TVL of the protocol in over 2 weeks, the velocity of opening and closing trading positions is limited by the cost of mainnet gas and the leverage ceiling. As such, f(x) will be launched on Base, an Ethereum Layer 2 rollup, which has lower gas fees and lower block times, allowing for higher leverage and lower fees. The combination of lower fees and higher leverage should allow for higher velocity of trading. In order to have funds available to establish a sufficient amount of liquidity on Base prior to launching the protocol, a fund raising effort is required, which is why the core team has proposed the issuance of the bFXN token on Base. The tokenomics and details of this launch can be found in this medium article: f(x) Protocol Expands to Base. We’re thrilled to announce that f(x)… | by f(x) Protocol | Jan, 2025 | Medium

As mentioned in the article, f(x) Protocol will receive 50% of the total supply of bFXN upon token generation. This allocation of bFXN will be max locked in perpetuity, and will collect a share of the revenue from the trading occurring on the Base fork of f(x). Because the conditions for quickly trading XPOSITIONS are more favorable on Base than on f(x), there is the possibility that the fork will be a greater source of revenue than the mainnet protocol. This potentially has the effect of the fork capturing more value than the original protocol on mainnet. This proposal aims to enable veFXN holders to continue to expand their ability to benefit from the potential for increased revenue generation on Base.

Proposal

To address the concern of the FXN tokens potentially losing value to bFXN over time, this proposal aims to offer a perennial buyback program for bFXN tokens. According to the proposed tokenomics, 50% of all bFXN will be locked by the main protocol, and 100% of the revenue generated by those tokens will go straight to veFXN holders.

As an alternative to 100% of all protocol owned vebFXN revenue being directed straight to veFXN holders, this proposal states that the revenue from the protocol owned vebFXN tokens be split in a 95/5 allocation:

  • 95% of all mainnet locked bFXN revenue be sent directly to veFXN holders
  • 5% of all mainnet locked bFXN revenue be used to periodically buyback tokens from the market and max lock them in perpetuity.

This buyback will have the effect of “reeling the fork back in” under the auspices of the mainnet protocol, continually accruing value to the mainnet FXN token via increasing revenue from locked bFXN. The buyback is intended to occur at regular intervals, and is at the discretion of the core team as to when those buybacks occur and in what format (straight market buy from LP, TWAP, OTC, etc…).

As such, there are two different options for how the 5% of buyback revenue can be spent that need to be decided upon by the veFXN community:

  • Option 1 - 100% of buyback funds are used to purchase bFXN (totaling 5% of revenue received by veFXN from vebFXN)

  • Option 2 - No buyback.

Should this proposal pass, the allocation of funds to the buyback will start immediately upon the initial locking of the original 50% bFXN to mainnet f(x) Protocol.

Poll

  • 100% of buyback funds are used to purchase bFXN (totaling 5% of revenue received by veFXN from vebFXN)
  • No buyback.
0 voters
2

@boz_m, what are your thoughts on this?

3

Proposal Feedback: Reconsidering bFXN for a Holistic L2 Strategy

Thank you for presenting FIP-09. While the proposal addresses many questions regarding Base expansion, there are significant considerations that warrant further discussion.

Concerns with Chain-Specific Branding

  1. Limited Expansion: Branding a token as “Base” FXN (bFXN) may restrict our ability to expand to other chains and collaborate with foundations across existing and future Superchains.
  2. Short-Term Focus: A Base-specific token might overlook the need for a comprehensive L2 strategy that facilitates growth and cross-pollination with other chains and liquidity pools within the Superchain ecosystem.
  3. User Experience Challenges: If bFXN is exclusive to Base while FXN serves the broader Superchain, it could create a fragmented user experience and potentially signal favoritism towards Base.

Proposed Alternative: sFXN (Superchain FXN)
To address these concerns and align with our long-term goals, I propose considering sFXN (Superchain FXN) as an alternative:

  1. Neutrality: sFXN would demonstrate our commitment to approaching all Superchains equally, fostering partnerships across the ecosystem.
  2. Flexibility: This approach would allow us to adapt our strategy as the L2 landscape evolves, without the need for multiple chain-specific tokens.
  3. Unified User Experience: A single token for the Superchain ecosystem would simplify interactions for our users across different L2 networks.

Implementation Considerations

  • Go-to-Market Strategy: We could still focus initially on Base while maintaining the flexibility to expand to other Superchains as opportunities arise.
  • Revenue Model: A unified sFXN token would require careful consideration of revenue distribution across different chains, but could ultimately lead to a more robust and scalable model.
  • Given a holistic L2 approach, tokenomics will need to be refactored for consideration

Conclusion
While this alternative approach may require additional planning, it offers a more forward-thinking solution that aligns with our DAO’s values and long-term objectives. I believe sFXN on multiple Tier 1 Superchains would position us more favorably for future growth and partnerships.

I appreciate the community’s thoughts and time for further discussion on this topic to further refine this proposal in line with FX Protocols growth efforts.

4

I agree with this - I think it’s important to take into consideration the longer term goal of multichain expansion across L2s, rather than simply one step at a time with yet another new token.

I agree with Boz that a better method would be to introduce a neutral-sounding name token (sFXN or nFXN, as examples) and use that across all L2s - even if the first deployment is Base. It has stronger branding this way and also optics wise, i don’t believe Aladdin DAO needs another token.

5

Thanks Boz for your input!

If the community agrees with your motivation, we are fine changing the naming to be more chain neutral.

6

How is this measured?

What specifically will you need to see from the community to motivate this decision to move forward?

Are you confirming that a longer term outlook and L2 strategy is not in the best interest of FXN?

Can you lay out the concerns on why it wouldn’t be, and specifically what is wrong with the response from the DAO’s perspective so we can accurately discuss and address each item individually?

7

Thanks Paul. Definitely agree with the notion of having a name that can fit more than just Base

1 Like
8

Honestly don’t know how you got to this. Ofc L2 are important.

bFXN isn’t set in stone. One minor concern with sFXN is that the letter s is often used for staked tokens, which might cause some confusion. Another option could be superFXN, although that might be a bit lengthy. But I digress from the main purpose of the forum post—perhaps we should continue this conversation on Discord, where more users who don’t check the forum regularly can see it.