0/ Tokenomics Tips - Token Float

Launching with a tiny token float has a high potential for short term euphoria at the cost of long term pain
1/ Why do so many projects launch w/ low float?

(a) Early venture investors & team have lockups & vesting to ensure long term alignment

2017/2018 era saw little lockups/vesting and funds would be quick to flip & dump projects on TGE so this is a good change
2/ (b) $YFI fair launch meme worked out alright

But this is more so the exception than the rule - all of the inflation hit within first week of launch which is materially different from inflation over multiple years
3/ Why is it so bad to have a low token float?

Because crypto markets are inefficient and the lack of supply (vs demand) results in an overly inflated FDV

People that receive inflation recognize the out of whack FDV creating heavy dumping pressure and declining token price
4/ Early token buyers and holders i.e. community members all get cucked

Community morale declines, people capitulate and stop paying attention to the project

You lose your biggest evangelists, talent pool, and contributors

5/ Project team members lose productivity having to constantly deal with negativity and price trolling in the community chats

It takes away from research, development, building product, etc
6/ That's not all. Your liquidity mining programs are denominated in the token. The incentives become less and less attractive. Accordingly, protocol liquidity growth slows.

If liquidity decreases, you're in for some real reflexive pain with token price & liquidity spiraling
7/ There are many projects that recently launched at risk of these circumstances. A few that have been around longer and through the process already include Mstable ($MTA), Curve ($CRV), and Hakka ($HAKKA)
8/ These projects had great teams which helped them weather the storm, but these storms can be avoided by launching w/ a larger circulating supply and softer inflation
9/ How to increase initial token float?

- Retroactive airdrop to previous product users proportional to usage/utility created
- Larger public sale (this also allows for better initial price discovery and token distribution to project enthusiasts)
10/

- Rewarding other contributors (educators, community admins, ecosystem devs, idea contributors, etc.)
- seeding large amount of AMM liquidity/market making
- small unlock for early investors that supported team for a significant time before TGE
11/ >20% initial circulating supply and <150% inflation are metrics to aim for with some wiggle room for initial float if inflation is lower

>200% annual inflation is generally very tough for markets to sustain
12/ Some builders prefer to ignore prices, but price trajectory is intertwined with protocol growth. Giving your early supporters a good entry and the opportunity to grow with you can make a huge impact

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More from @Rewkang

3 Mar
Bancor literally developed a working model for IL protection and y'all are sleeping on it

If the bull market sustains, expect $5B TVL within a few months
It's a no-brainer for every project to get a whitelisted pool and dunk their treasury in there

IL and ETH/Stablecoin capital requirements are the primary reasons why projects aren't putting more liquidity into AMMs

Bancor literally solves both with IL proctec + single-sided LP
No need to spend coins on expensive pool 2s anymore. Subsidizing pool2 liquidity in perpetuity is not a sustainable model either

Not only do you save $, but you earn a yield as well from trading fees w/out IL risk
Read 5 tweets
28 Jan
1/ New update for @fraxfinance will have the protocol yield farm with reserves

This is a pretty major positive change that increases the resiliency of the system and can see other reserve-based algo stablecoins adopting this mechanism as well
2/ The issue with all algo stablecoins is that the supply of the stablecoins are too interconnected with the price of the share token

The reflexivity works in both directions - both up and down

Higher price🔄 More Supply
Lower price🔄 Less Supply
3/ This reflexivity exists for as long as share tokens are used to reward those that hold the stablecoin (usually for LPs)

But using yield farming to *safely* yield farm can help to prevent death spirals as the yield can be used to build reserves, making users less likely to run
Read 7 tweets
24 Jan
With $50-$500 dApp interaction fees, DeFi mainly just caters to the whales

Major DeFi apps launching on Layer 2 can 10x the number of DeFi users

2021 is the year it happens
But DeFi apps will be launching across a host of different L2s - zksync, Starkware, Optimism, Matic, etc

With long or costly exit times moving between L2 to L1 to a different L2 users don't get the real DeFi UX that make it so magical
Luckily, @thorchain_org exists

People talk about Thorchain in the context of connecting other L1s, but most L2s are separate blockchains themselves that can just as well connect to Thorchain
Read 10 tweets
17 Jan
1/ Brief history & Roadmap of @CreamdotFinance

One of the fastest shipping teams in DeFi
2/ August - Launch of CREAM V1 on Ethereum

CREAM V1 launches as a fork of @compoundfinance targeting the long tail of assets, similar to the @UniswapProtocol & @SushiSwap dyanmic

medium.com/cream-finance/…
3/ Within 1 month CREAM surpasses $100M TVL due to quick listing of $YFI

medium.com/cream-finance/…
Read 19 tweets
16 Jan
The YFI minting decision can be distilled down to the following:

Will the value created by minting outweigh the cost of minting (i.e. dilution) for token holders

The answer is clearly yes
Productivity of development is key to protocol growth. A 3x increase in development productivity and output will translate to token price which obviously all of us care about

Love the 30k meme, but retaining + growing contributor/dev talent is more important
YFI is meant to be a productive cash flow producing asset, not digital gold
Read 7 tweets

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