Seeing the massive success of Yearn I can't help but contemplate on the eve of the war, what the right ratio of liquidity reward inflation vs. founder reward is. Obviously its a question laden with sunk costs. But here is my scientific approach to really learning from this:
1) The RC build we're releasing is tokens trading + KYC whitelists, featuring Trade Channel LTC trades for tokens that are fast. Vesting Tokens of Founder Reward begin accruing past 1000 LTC, the first ALLs are going to my trading desk and early investors, hmm. LTC/USD spot arb.
2) The subsequent Oracle build, which may be released relatively quickly *possibly* in time for simultaneous activation, depending on how merge issues go this week, will enable BTC/USD swaps/futures arb. It's a no-frills, closely held ALL at this point, pure fee competition.
Having established a super awesome product market fit of a handful of trading desks leveraging the medium of TradeLayer to cross-hedge while arbing across the Bitcoin derivative complex, *then* let's turn on Native (needs more work on settlement weightings, maybe 1-2 months).
Native is where Liquidity and Node Reward enter in. Anyone can grab node reward. People with no money except their $300 laptop with a $30 RAM upgrade will run a script and get ALL for the low cost of ~100 Litetoshi in miner fees. So that's cool for them, how we get 10k full nodes
The reason we don't do Liquidity Reward for Oracles is anyone can psuedonymously make an oracle with a contract notional value of e.g. 1B USD and try to get that to triangulate to calc. LTC value, and dilute ALL, it's not cricket. It's got to be a subsidy for Native in feedback.
Native fees are lower by 1/2 than Oracle, Oracle has an Oracle to pay revenue to, and its own insurance fund to top-up, needs more. Thus Native arbs in with this ALL Liquidity Reward making it a rebate with floating price, and the Yearn-style drive to bring-forward supply enters.
I viscerally appreciate how powerful an asset with low-float, closely held, most supply trickling in through automated emission, people buying futures to edge up on a possible rush. The futures hedge the swaps, the swaps create sLTC from 1x hedging ALL on the ALL/LTC native perp.
There are two parameters I can look at regarding inflation from "yield farming" (what I call Liquidity Reward), how the Vesting schedule in cumulative LTC volume attenuates to the Liquidity Reward. Make sure the float stays even while fully-diluted has these latent units.
The other one is to simply make the Founder Reward total units smaller with the same log-scale projection of Liquidity Reward units, so it occupies a smaller portion of the total supply in time, faster.
The Bitcoin version will do this, out of respect to the Bitcoin principles.
The Bitcoin version will do this, out of respect to the Bitcoin principles.
For Litecoin I figure, this thing needs trading capital to galvanize, and having a more meaty Founder Reward for Litecoin's version helps stoke that early liquidity on the raw arb side.
Let's illustrate the power of fee unit economics over promotional dilutive fee economics:
Let's illustrate the power of fee unit economics over promotional dilutive fee economics:
Imagine a future where Uniswap does 10B or 100B in daily volume because some of these Q2 DeFi coins are, for fun, say becoming global reserve assets. The derivatives do 60-70B daily like CME gold. You made it. Uniswap charges 30 bps but will compensate you some of their coin.
Vs. ETH DeFi is big time and Uniswap coin holders begrudgingly vote to lower the fees to 1 bps to rake a more sensible piece of that mature volume pie. Begrudingly because, non-voters sold at profit on the P/E overshoot that didn't factor this fee compression in, plus inflation!
In Yearn's case I think it does a one-stop agglomeration desk for your farming needs and is thus somewhat indexed to the governance choices around fee levels that all these contracts effect. Correct me if I'm misunderstanding Yearn here. The index effect blends relative value.
What I'm thinking about doing is making it 1B LTC instead of 100M to fully vest the Litecoin VTs, 61B today, probably hundreds or Ts by the time we get going, but because it's bigger, maybe it's fair. Shaves 2% out of each log 10 jump's vesting.
"Why not no Founder Reward"
It cost me everything I had to build this, plus aid of other investors. We spent probably 2 months of 1 guy's time programming vesting, plus another week of testing recently. I couldn't 1 man prototype a contract on the EVM, building on BTC stack.
It cost me everything I had to build this, plus aid of other investors. We spent probably 2 months of 1 guy's time programming vesting, plus another week of testing recently. I couldn't 1 man prototype a contract on the EVM, building on BTC stack.
In conclusion, I'm going to try and leverage the capital stock of a Founder Reward, quite literally when it comes to margining the Native derivatives with an arb desk, in order to prove that the unit economics of radically lower fee and resulting exponential arb volume is king.
However, I am committing to the Vesting Tokens for TOTAL, the Bitcoin version's metacoin, to be diluted by the liquidity reward as a minority stake by the time it fully vests, and extending the Litecoin VTs to vest more slowly.
Trying to hit the sweet spot.
Trying to hit the sweet spot.
There is no governance in TradeLayer, except a sheet of consensus-changing activations we have cached, all the params are set from the start, like Bitcoin was. If you want a lower fee than 0.25bps on a native contract, sign 50x the volume than you publish to settle, ->0.005 bps.
