✔️[ABIP-03] - [RFC] Reduction in total Supply & APY

electo · February 9, 2022, 5:15pm

Summary

Studying recent market changes especially around rebase models, the treasury and policy teams have decided to put forth a proposal that will:

Reduce total supply from 100 million to 10 million.
Reduce APY to a more sustainable value to ensure at least 1 yr of runway.
Drastically improve bonding incentives to grow the treasury.

This will effectively ensure the total supply is reduced by 10x & the APY will also come down to match the reduction in supply. The teams want to do this to ensure that the issuance of ABI always stay at a sustainable level with respect to the treasury.

Because of the rate of APY decrease, any speculators that want a higher piece of the overall supply will need to bond and cannot just rely on their staking stack

Those who bond or buy early and stake will get the highest reward and marketcap of the overall Abachi that will ever exist

Abstract

The team is proposing a reduction in supply to 10m from the earlier 100m supply Abachi planned to issue. The reduction in supply does not affect the project since the supply does not exist, however ensures that the token and price faces much less dilution.

This will be added to the smart contracts as a hard cap. Moreover the treasury also wants to ensure that the total emission schedule is over a period of 9 years without bonding. The only way to increase dilution (up to a maximum of 10m) is to be able to bond.

With the above it is also proposed that the APY be brought down to a much more sustainable level. This will ensure long term holders will still benefit the most, but shorter term price swings will not have an adverse affect on the community.

Reduce total over mint possible from 100m to 10m.
Reduce the total APY based on new framework given below.

Motivation

First:
Abachi used the rebasing mechanism for token emissions instead of the traditional ICO method. However with this there is an expectation that the treasury also constantly increase (even though the products are not out). This pressure is increased as the total emissions and APY are high.

Abachi was never meant to be a backing or reserve currency. When we reached out to Olympus DAO back in Nov, this was our pitch to them also. Albeit, we did ask for Olympus to buy the token (ABI) from us instead of us providing these tokens. New projects are now using this model, and we do think this will become a defacto way of fund raising, we can see projects now buying up seeds in other projects.

While we in the team still think this is the best way to raise, where the control is with the market and the project that owns the liquidity, we do think we need to keep market expectations in check also. Not everyone will be staked for 1-3 years and a high emission will drive the price down at least initially as the treasury will not increase at the same rate.

Secondly
Abachi has a high conviction position in DeFi. This includes Olympus DAO. For us to be able to keep this conviction, it is important that the treasury be able to maximise in the assets it thinks will lead the future. To do this we will need to increase the treasury stable holdings. A lower APY and emission will allow more people to bond initially to capture market share and also become lucrative as APY drops.

Current Treasury Distribution

Token Treasury
The Main Abachi treasury that provides the minimal viable price for ABI is on L1 Eth under the abachi.eth wallet. Additionally 100k is also in seperate team wallets being used on CRV, Vesta Finance & Balancer.

Abachi owns 1m in this treasury without counting any LP positions. If the LP and the bond fees are included, the treasury currently sits at 1.5m.

Dev Treasury
In addition to above, Abachi also owns around 700k in stables which is used to pay for development & research. This amount was raised from pabi sales.

DAO community treasury
10,000 sABI is locked under the DAO treasury to be used for future initiatives.

Token Distribution

The proposal does not change the token distribution in terms of percentage as the future tokens dont exist yet.

Pros

Reduces sell pressure significantly caused due to rebases
Increases runaway to our target (356 days)
Increases potential value of each ABI currently in circulation.

Cons

APY reduction may cause speculative shorter term holders to exit.

waqhon · February 9, 2022, 5:51pm

1000% in favor of this proposal.

Balthasar · February 9, 2022, 5:59pm

I am in favor of this.

ShinMegamiTensei · February 9, 2022, 6:01pm

100% in favor of this proposal

FendiK · February 9, 2022, 6:03pm

Let’s do this then. What helps the projects helps us all.

Anam_Aamir · February 9, 2022, 6:14pm

Aye! Great idea! Lets do it!

Hyperkodi_3_3 · February 9, 2022, 6:22pm

YesX100

This is a great idea. We need to reduce sell pressure early in order to appeal to future investors.

Baxtwich · February 9, 2022, 6:30pm

Aye ! Let`s do it ! I agree.

fOJI_3_3 · February 9, 2022, 6:40pm

Let’s go ahead with this. Very good long-term prospects.

freeba · February 9, 2022, 6:55pm

Yes, lets do this. <3

Mesmerising · February 9, 2022, 7:00pm

Absolutely, this is needed

ChadwickTheCrab · February 9, 2022, 8:07pm

My vote is for sustainability. Send it.

Muhammad_Yousuf_Faro · February 9, 2022, 8:20pm

How will you drastically increase the bonding incentives, reducing APY plus increasing bonding incentive will result in double whammy for the current stakers. ideally if you get more bonding revenue you increase APY to compensate the dilution

Creon · February 9, 2022, 8:26pm

My vote is for sustainability. Send it.

Tumtum_3_3 · February 9, 2022, 8:51pm

yes, In favor of this.

MommaBearG_3_3 · February 9, 2022, 9:54pm

YES!!! This is an amazing idea and I cannot wait!!!

LESGO!!!

Nico822 · February 10, 2022, 1:21am

there is a missing point… the project has been built on 100 mil tokens… why would 10 million be better off in the long term for its utility?

Duskey · February 10, 2022, 4:06am

I like the proposal, but I do have some concerns implementing at this point in time. My main one is this.

In 3.5months, ~33K pABI will be released. This proposal will help to keep $Backing high and would be good … if pABI holders could not redeem pABI for $Backing, taking away from treasury. Keep in mind that this proposal does not guarantee $ABI rises. My numbers might be off but taking backing at $10 per token, thats $0.3mil.

If other actions were taken in tandem to ensure $ABI slightly > $Backing + $5, pABI holders will be incentivized to bond to the treasury for ABI, and hold as $ABI isn’t at too much of a premium.

The other concern would be bonding incentives. Again, if no new inflow comes into Abachi, $ABI will tend to match the $bonds. Furthermore, each ABI is worth less, setting the floor price lower. If $ABI = $30 for example, $Bonds can be set to $27 and it’d be a good 10% discount. $ABI = $12 now, $Bonds would be about $11. Less bang for your ABI so to say.

The main summary point is that, instead of incentivizing bonds, we need to incentivize ABI, and the rest will fall in place smoother. 900 holders can only provide so much money

_davfc · February 10, 2022, 5:38am

We are here for the long term, so yes lets do it and we can see better results in the future. Abachi for life.

electo · February 10, 2022, 5:38am

Agree with a lot of concerns and questions raised. @Duskey @Muhammad_Yousuf_Faro and @Nico822

Here is the similar proposal for Btrfly. Keep in mind, the only baseline we should compare to right now in my opinion is btrfly because of the institutional traction they have seen in their buys (blocktower, parafi etc.)

Seems to be a general consensus that unnecessary dilution should be avoided as much as possible.

Some other concerns (and keep in mind, this is my opinion only, I will not be voting to swing the vote, want to keep this community driven).

The initial 100m supply was based on rapid expansion. This meant achieving 1m emission in 30-60 days and 10m in 2 years. Given the market conditions, if we target those emissions, the token price will most definitely take a hit and the treasury will not be able to keep up with the APY. (Also defined in detail in the btrfly link above). A high number of those emissions modelled with the 100m supply were based on bonding. Now that we have more data from Abachi and also other successful forks, we can clearly see the rapid expansion OHM and some early forks enjoyed at the risk of premium to backing did not work out well.
Double whammy for stakers as mentioned above is true. However we need to educate the community also. Holding a high amount of coin with low amount of liquidity is not in the best interest of the project or LP. I go back to the core reason we use the Olympus model. Protocol owned liquidity. Without LP - there is no market. Without a market the price is 0. We are lucky, we have a nice amount right now in LP and even a bigger amount sitting in treasury that can be deployed if ever needed. This however will not be the case if we keep emissions high and bonding activity is low.
I agree we should target around education to bring more people onboard by having them buy at market and stake. However buying at market and staking does not do much for the protocol if emissions are high. Rebasers will keep selling every appreciation in price. Since we are a longer term project, this can only drive the price down. We can see this happening right now in OHM price action. The $70 - $60 range. Volumes on OHM in terms of Bonds and market buying are lower than they have been. Most exchange volumes reported in January were also on a month on month decline.