As a contribution to ongoing tokenomics discussions, I submit the following idea fragment for the community to consider. This is meant as just a rough idea to think about and perhaps combine with others assuming that the DAO decides to have a direct reward distribution to stakers, which is not a given.
Sushi-type mechanism for ALD
While we search for the best way to capture AladdinDAO’s created value into the ALD token, several times the xsushi model has come up. The relevant part of the xsushi model involves selling revenue (in Aladdin’s case, protocol fee from curated farm vaults) in order to buy back native (ALD) tokens for distribution to ALD stakers. This mechanism would ideally push up price by directly buying ALD, and also add buy pressure by incentivizing buying and single staking ALD.
Why XSushi model is not right for Aladdin
While it is likely that this would support ALD price in the short term, I don’t believe this approach is quite right for AladdinDAO in the long run. Aladdin’s revenue, unlike Sushi, comes largely in the form of farm tokens that have been selected for their long-term potential for growth - so-called prime defi assets. The largest part of their value is realized over a longer term, so selling them as soon as we receive them, especially a large fraction of them, is counterproductive and not in line with the AladdinDAO farm-and-hold approach. Moreover, by selling immediately we are only connecting the value of the farmed token at the moment of claim to ALD, rather than the hopefully much bigger value the token eventually has.
Growth sharing instead?
If the DAO decides to adopt a direct-sharing mechanism whereby there is some kind of distribution of either farmed tokens or bought-back ALD, I suggest we consider sharing a portion of the overall growth of the treasury, rather than just the protocol revenue.
Consider, for example, a weekly distribution to single stakers that is comprised of EITHER 10% of platform revenues OR 10% of overall treasury growth (in USD terms, I guess?), whichever is greater. The distribution would come equally from all treasury assets (or those selected by a manager), not just revenue. Growth might be calculated by looking at TWAP of treasury assets for previous 7 days, compared to TWAP of assets for the 7 day period prior to that, i.e if the USD value of the treasury has increased by $100,000, in the past week, then we distribute $10000 worth of treasury assets, either as farmed tokens or bought-back ALD, to stakers.
I didn’t put much thought into the actual % numbers, maybe fractions would need to be much larger or smaller.
A few potential benefits to growth sharing
- Portion of long term value of Aladdin treasury is captured into ALD token
- Immediate buy pressure by adding single staking (and potentially buybacks)
- Creates a strong value narrative to use for marketing => Stakers get some yield no matter what, in down market it is just a fraction of revenue, in bull market it includes growth
- Using the treasury growth as the basis for calculating rewards means that anything which positively impacts treasury growth will positively impact yield, helping incentivize good treasury management
What do people think? Do any other protocols do anything like this? Would it set Aladdin apart? Would it even work? Is it even necessary?