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

Agree with the background, this will reduce the potential risk of dilution.

2 Likes

I think this is best for our sustainability in the long term, 100% onboard

3 Likes

Lets do this!!!

Will be a blow for APY gainers. But looks more legit in the long term.

2 Likes

You decrease the total supply = increases chances of a higher price for ABI.
You decrease the rebase rate = you increase chances of less money coming into the project (but the money you do get stays longer)

I have tried to read up on the proposal a couple of times. I have some questions, and I would love for you or anyone to answer them.

So far, I think the proposal is put up to react to the current market conditions. I don’t think that alone is a good enough reason if the end result of the proposal brings us, as a community, back to the same “investment” equation.

I say this because Abachi is not a currency, but a project with products.

Essentially, if you decrease the supply and keep the same rebase rates, Abachi will reach full dilution (all token given out) in months instead of three years. And if that IS the case, what’s so terribly wrong with that?

Decreasing supply and then decreasing APY doesn’t make sense to keep the emissions going for three years. Unless this three years number has more significance than I had imagined!?

If you are decreasing the APY to discourage people from selling when the price of ABI moves, for example… how would decreasing the APY help do that? I mean, the community will still want to sell their rebased ABIs to have their investment in Abachi pay off dividends.

I don’t see how decreasing APY changes that sell pressure.

Decreasing APY does seem to discourage more short-term money to come in to the project to begin with. This in turn, and only in turn, reduces chances of high sell offs when price moves up.

But decreasing the APY also DECREASES new money coming in.

The sell pressure will still exist. Someone staking 1000 ABIs will be taking out the rebases every month regardless of the APY. The community has invested in ABI to of course see it grow, AND take out profits at a sustainable level. So “sell pressure” delta looks insignificant all things considered.

And if the APY is being reduced to have a 365 day runway (you mentioned you want to make the project sustainable), where is that number coming from? 365 day runway is a target, but why? Why not a 700 day runway then? Or a 180 day runway?

The logical reason for reducing APY will be to keep a healthy runway but what “investment plan” will educate the community (including me) that my returns are secure for a year, instead of being secure for say, a quarter? Also note, the idea of returns again means that I am selling at least some of the rebased ABIs, which is why that sell pressure reasoning is not adding up.

In summary, reducing supply AND rebase rates will essentially maintain the same position. I will make less token at the end of the month, but we will have a relatively higher price.

How these two changes will bring anything to the PRODUCT itself, that I don’t see. Please make me see if I am missing out on that. Would of course love to understand.

3 Likes

I have two questions about the proposal. How will we “Drastically improve bonding incentives to grow the treasury.”
And how will “Increases the potential value of each ABI currently in circulation.” Happen when it won’t affect the price at all? Also when we are reducing the apy on rebase but increasing the bond incentives won’t that make price dump more and hurt the current holders?

1 Like

Hey momekh. Let me take a stab at this (others also welcome).

  1. You are correct this is based on market conditions, but it takes into consideration volumes and premium. Initial modelling was done when OHM was at a 5x premium to backing, Wonderland and other rebase models running at 2.5x. This is no longer the case. Market being efficient, has killed that premium. We now know that the premium was largely fueled by leverage. (OHM dropped from 1200 → 60).

  2. Decrease supply is definitely not an increase a price. This is not the intent though it might be side effect. The intent here is to decrease sell pressure. This is important because the first and foremost thing the treasury needs to ensure is LP. The liquidity is what drives a market for a token, without liquidity the project and market is dead. If the market is gone, you cannot get it back. This is what the Olympus model does extremely well. Right now we have 250k or so in the LP and 1m sitting on the side we can put in the LP. This means we are in an extremely healthy position and would like to stay that way. If the emission is increasing and treasury is not, the health of this falls. Quite fast.

  3. The proposal is proposed for the protocol and the project to be healthy. It was not modelled to make token price go up. Markets will do that.

3 Likes

Hi Imadee - If the project is doing well, and someone needs to buy a position in ABI - the only way to do it currently without pushing the price too high is by bonding. If you buy into the current LP pair with e.g. $15,000 you will push the price up a lot. Grabbing a discount is an incentive. (In theory). Still the market decides what it wants.

If there is someone arbing the bond (sell in market and buy on bond) they are effectively locked for 10-14 days of vesting. They are taking the risk of dilution and arb and locking themselves in. This help reduce any sell pressure in short terms (intra day).

1 Like

Agree with this proposal

2 Likes

Thanks for this, this helps.

  1. Holding OHM at different premiums can be “controlled” by changing supply and rebase rates… how would that work? Or is that effecting the LP and protecting that in the future is the primary concern?
  2. Great point and reminder. Thanks. Again, decreasing total supply will make the LP healthier, I don’t know the mechanics behind LP and total supply, so if that’s what decreasing supply does, make sense.
  3. I think the primary purpose is to protect the LP, as that in turn keeps the project healthy. And the two proposed solutions do that i.e. protect the LP in the long term.

Thank you bro, as at least now I am clear on what these two proposed changes are designed to do (protect the LP).

p.s. I tried to like my own comment, thought I’d put it out there. :smiley:

3 Likes

Haha all good. We all learn, discuss and learn more.

OHM does not have an upper limit on emission since it’s a backed currency. The best Abachi (and other projects) can do is accumulate it as close to backing and rfv as possible. This gives the biggest returns to increase underlying value. OHM has also reduced apy to 850% and they will be adding inverse bonds which will act to reduce their supply also when people want to exit. OIP-76 on ohm talks about this in detail.

4 Likes

I read through Redacted’s proposal and I think I grasped a new POV that no one seems to have pointed out before; that bonding is technically not dilutive if $bonds are above $backing or MVP as Btrfly calls it. I’ll try to pen down an article once I have organized my thoughts. So long as the $bond > $backing, my second concern is invalid.

As for the pABI concern, well in hindsight 3.5 months is a very long time in crypto space. Plus, I forgot the simple fact that pABI holders did pay $5 per token (hence redemption is only a $5 profit), funded the project to even get it going and probably are invested in the project long-term anyway. Perhaps it isn’t as big a concern as I thought it was.

Well, the team has delivered before and will again, if the proposal was brought up, I believe there must be good reasons + nights of discussions so I guess I have converted to yes for the proposal :grin:

2 Likes

Thx.

Yes bonds add value to the system, by quite a lot. Rebasing is a mechanism to ensure that dilution is offset for current holders.

As the treasury increases overall health of the protocol increases, liquidity increases.

Liquidity is much more important than price. With higher liquidity the growth will be more sustained and dumps less volatile.

3 Likes

Good idea makes sense to be honest

3 Likes

Obviously another great idea. Yes of course. I don’t give a f*** about the short term holders. if they have to go they will, sooner or later.

2 Likes